Table of Contents
TABLE OF CONTENTS LIST OF FIGURES..............................................................................................4 LIST OF TABLES................................................................................................5 ABSTRACT..........................................................................................................6 DECLARATION..................................................................................................7 COPYRIGHT STATEMENT.............................................................................8 ACKNOWLEDGEMENT...................................................................................9
CHAPTER1: INTRODUCTION AND STRUCTURE OF DISSERTATION 1.1 Introduction…………………………………………………………………..10 1.2 Aim & Objectives………………………………………………………….....12 1.3 Methodology……………………………………………………………........13 1.4 Limitations………………………………………………………………….. .14 1.5 Structure of the dissertation…………………………………………………..15
CHAPTER2: LEAN THINKING VS MUDA 2.1 Introduction…………………………………………………………………..17 2.2 The Concept in Detail………………………………………………………...18 2.3 History and Evolution of Lean Thinking……………………………………..20 2.4 Perspectives on Lean……………………………………………………….....24 2.5 Principles of Lean Thinking…………………………………………………..26 2.5.1 Value…………………………………………………………………....27 2.5.2 Value Stream…………………………………………………………...29 2.5.3 Flow…………………………………………………………………….37 2.5.4 Pull……………………………………………………………………...44 2.5.5 Perfection……………………………………………………………….51 2.6 Summary………………………………………………………………………54
CHAPTER3: LEAN THINKING IN SUPPLY CHAIN 3.1 Introduction……………………………………………………………………55 3.2 Overview of the concept: Supply chain Management………………………..56 1
Table of Contents 3.3 Structuring and Tiering…………………………………………………………58 3.4 Characteristics that make Supply chain different………………………………62 3.5 Supply chain Performance……………………………………………………...63 3.6 The Unique Misconception of People……………………………………..........64 3.7 The Lean Supply chain………………………………………………………….66 3.8 Why Lean.............................................................................................................66 3.9 Lean Supply chain Process……………………………………………………...68 3.10 Lean Practices…………………………………………………………….........71 3.11 Attributes of a Lean Supply chain……………………………………………..75 3.12 Components of the Lean Supply chain………………………………………..79 3.13 7 Deadly Supply chain wastes……………………………………………........82 3.14 Benefits of Lean system in Supply chain………………………………………86 3.15 Path forward in Lean supply chain……………………………………………..87 3.16 Summary………………………………………………………………………..88
CHAPTER 4: LEAN ELEMENTS AND TECHNIQUES 4.1 Introduction……………………………………………………………………...89 4.2 Why Lean techniques? The Importance…………………………………………90 4.3 Andon……………………………………………………………………………91 4.4 Heijunka………………………………………………………………………….94 4.5 Jidoka…………………………………………………………………………….97 4.6 Kaizen…………………………………………………………………………...100 4.7 Muda& Mura& Muri……………………………………………………………103 4.7.1 Muda………………………………………………………………………105 4.7.2 Mura………………………………………………………………………107 4.7.3 Muri……………………………………………………………………….108 4.8 Poka-yoke……………………………………………………………………….109 4.9 Kanban………………………………………………………………………….110 4.10 Takt time………………………………………………………………………113 4.11 5S……………………………………………………………………………...115 4.12 Shojinka……………………………………………………………………….118 4.13 Ugoki………………………………………………………………………….118 4.14 Ninben no tsuita jidhoka……………………………………………………....118 4.15 Kaizen Teian………………………………………………………………......119 2
List of Figures
4.16 Summary……………………………………………………………………..119
CHAPTER 5: COMPARATIVE STUDY OF LEAN PRINCIPLES IN THE CONSTRUCTION & AEROSPACE INDUSTRY 5.1 Introduction……………………………………………………………………..120 5.2 Nature of Construction Industry…………………………………………...........121 5.3 Lean Construction: Brief History……………………………………………….121 5.4 Nature of Aerospace Industry…………………………………………………...123 5.5 Key drivers of lean in Aerospace………………………………………….........123 5.6 Transferring lean into Aerospace- the challenges………………………………125 5.7 Why Aerospace and Construction? – The differences …………………………126 5.7.1 Introduction……………………………………………………………….126 5.7.2 Structural Differences…………………………………………………….126 5.7.3 Relation with Government………………………………………………..127 5.8 Comparison of Lean Thinking Principles across Construction and Aerospace...128 5.8.1 Value……………………………………………………………………...129 5.8.2 Value Stream……………………………………………………………...131 5.8.3 Flow…………………………………………………………………….....133 5.8.4 Pull………………………………………………………………………..135 5.8.5 Perfection…………………………………………………………………136 5.9 Summary………………………………………………………………………..138
CHAPTER 6: MOVING ON- BEYOND LEAN THINKING 6.1 The Lean Life style……………………………………………………………...139 6.2 Winding up………………………………………………………………….......139 6.3 Beyond Lean Thinking………………………………………………………….142 REFERENCES........................................................................................................143 BIBLIOGRAPHY…………………………………………………………………151 APPENDIX………………………………………………………………………...152
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List of Figures
LIST OF FIGURES
Figure 1.1: Lean Thinking Principles…………………………………………........19 Figure 2.1: Product Family Matrix…………………………………………………30 Figure 2.2: Value Stream Maps…………………………………………………….32 Figure 2.3: Value Stream for Cola Cans……………………………………………34 Figure 2.4: Confluence of Cola Value Stream……………………………………....36 Figure 2.5: Bicycle Plant Layout and Flow………………………………………...41 Figure 2.6: Lean Bicycle Plant Layout and Flow…………………………………...43 Figure 2.7: Push (vs.) Pull…………………………………………………………..44 Figure 2.8: Toyota PDC before Lean Thinking……………………………………..49 Figure 2.9: Toyota PDC after Lean Thinking……………………………………….51 Figure 3.1: Conceptual Framework of Supply Chain………………………………..59 Figure 3.2: Complex Supply Chain Network………………………………………..60 Figure 3.3: Supply Chain System + Tiering…………………………………………61 Figure 3.4: Benefits of Lean Supply Chain………………………………………….68 Figure 3.5: Seven Wastes of Lean Thinking………………………………………....82 Figure 4.1: Elements and Techniques of lean.……………………………………….91 Figure 4.2: Traditional Andon Board………………………………………………...92 Figure 4.3: Modern Andon Board……………………………………………………93 Figure 4.4: Ohno’s Teachings………………………………………………………..94 Figure 4.5: Heijunka Box…………………………………………………………….96 Figure 4.6: Japanese Perception of Job function……………………………………101 Figure 4.7: Improvement broken down into Innovation and Kaizen……………….101 Figure 4.8: Muda + Muri + Mura…………………………………………………...104 Figure 4.9: Kanban System…………………………………………………………111 Figure 5.1: Comparison of Lean Principles………………………………………...129 Figure 5.2: Institutional Market…………………………………………………….130 Figure 5.3: Development Market…………………………………………………...130 Figure 5.4: Flows in Construction………………………………………………….134
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List of Figures
LIST OF TABLES Table 2.1: Value Stream Details of Cola Carton……………………………………35 Table 2.2: Continuous Improvement of FNGP…………………………………….54 Table 4.1: 5S………………………………………………………………………..116 Table 5.1: Construction and Its Clients…………………………………………….132
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List of Tables
ABSTRACT With the current trend of globalisation in the market and around the globe, companies are finding it difficult to cope up and sustain their competitive edge which is leading to lower profitability and results. Employees of companies must make an effort to adopt innovative managerial concepts to sustain with market competition. But the biggest problem that companies face is that the employees of the company believe that their practices are the best and no other managerial concepts is better than the company’s current practices. Such a misconception generally leads to negative and failed results. Initiative for implementation of innovative concepts should start from the top level management and then spreads throughout the organisation.
Lean thinking, an innovative concept which has revolutionised industries in the twenty first century, is the concept which can be applied to stay competitive. It is used as a competitive tool by companies and has derived many benefits by creating value to customers and eliminating Muda in the process.
The dissertation helps in explaining and making the concept of lean thinking understandable. It includes all the elements and techniques related to the lean implementation process.
An attempt is made to disclose this topic by critically examining the existing literature. Data was gathered from books and company websites to analyse and show the practicality of the concept.
The dissertation concludes by making the reader understand the principles of lean thinking. It also shows how lean thinking in supply chain produces better and faster results than ordinary supply chain management. The wide scope of lean is presented by comparing the principles of lean thinking in two massive but very different industries.
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Abstract Keywords: Lean, Lean thinking and techniques, Lean construction and aerospace.
DECLARATION
No portion of the work referred to in the dissertation has been submitted in support of an application for another degree or qualification of this or any other university or other institute of learning.
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Declaration
COPYRIGHT STATEMENT
Copyright in the text of this dissertation rests with the author. Copies (by any process) either in full or in extracts may be made only in accordance with the instructions given by the author. Details may be obtained from the appropriate Graduate Office. This page must form part of any such copies made. Further copies (by any process) of copies made in accordance with such instructions may not be made without the permission (in writing) of the author. The ownership of any intellectual property rights which may be described in this dissertation is vested in the University of Manchester, subject to any prior agreement in contrary, and may not be made available for use by third parties without the written permission of the University, which will prescribe the terms and conditions of any such agreement. Further information on the conditions under which disclosures and exploitation may take place is available from the Head of the School of Mechanical, Aerospace and Civil Engineering.
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Copyright Statement
ACKNOWLEDGEMENT I would like to express my gratitude to those who had helped me with the preparation of this dissertation.
Firstly, I must thank God for giving me the strength to complete this study for my master’s degree course.
To my father, Mr Vinod Thomas, thank you for your advice, continuous support and encouragement. To my mother, Mrs Betty Thomas, thank you for being a constant source of strength and showing me the power of faith. To my Sister, Sumina Thomas, thank you for your love and support.
I am grateful to my supervisor, Mr Callum Kid, whose guidance, advice, critiques, supervision and expert feedback during many informative discussions concerning concession contracts had put all things together to bring this study to fruition.
Special thanks to my other professors, lecturers and administrators from the School of Mechanical, Aerospace and Civil Engineering (MACE) and library staffs at the University of Manchester for their assistance in supporting my academic aspiration
I would also like to thank my classmate Bobo Bania for her useful insights on the topic and the drawings she helped me with.
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Acknowledgement
CHAPTER ONE Introduction and Structure of Dissertation 1.1 Introduction In the words of Peter Drucker “the industries of industries”, the automobile manufacturing till today is considered the largest manufacturing activity with nearly 50 million new vehicles being produced every year. This industry is very important to mankind and has changed our most fundamental ideas of how we make things. (Womack et al., 1996)
At the time of World War 1- Henry Ford and Alfred Sloane moved the craft production of the European firms into the age of mass production in the United States which resulted in them dominating the global economy. But then the industries were worsened by customers who have a higher demand for service and quality. Not just the manufacturing industry but just about any industry such as construction, aerospace, service industry etc are facing the same challenge from their customers demanding good service and better quality.
Studies have highlighted the need for a better concept to breakaway from the barriers of traditional practices. These practices which have produced low, earned lesser profitability and failed to provide clients with acceptable service and good value for money. Research have shown that industries in the past worked in intense fragmentation, there was no integration between the suppliers both upstream and downstream resulting in conflicts between the different companies. (Harrison et al., 2005)
According to Womack et al. (1996) the increase competition, customer demand and complexity had continued to stimulate and increase in the potential of such destructive relationships. It was a time to change and integrate the industries – a better concept 10
Introduction and Structure of Dissertation was needed. By the end of World War 2, Eiji Toyoda and Taiichi Ohno at Toyota in Japan pioneered the concept of the Toyota Production System (TPS) which was later perfected by them. It was given the name Lean by Womack and Jones. It is this very concept that helped Japan to rise to its current economic superiority. At first, it was adopted in the manufacturing industry and when asked the question: what is lean production? Perhaps the best way to describe it is by contrasting it with craft and mass production. The lean production combines the advantage of both while avoiding the high cost of the former and the rigidity of the latter plus by focussing on the elimination of waste in the production system. (Womack et al., 1996)
The concept of lean thinking works with a combination of 5 principles: Value Value stream Flow Pull Perfection Though this concept of lean has its root in the manufacturing industry, it has been adopted and applied in various other industries and results have proved that lean thinking practices have been successful giving better services and quality to the customers in the other industries. This concept has changed the culture in industries to be less adversarial and be more aspirational. (Womack et al., 1996)
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Introduction and Structure of Dissertation
1.2 Aim & Objectives Given the background presented in the introduction of this chapter, the aim of the dissertation is understood.
The primary aim of this dissertation is to study and understand the lean thinking model and revealing the efficiency of the supply chain by applying concepts of the lean thinking model.
The dissertation does this by pursuing the following objectives: To carry out an extensive literature review on the concept of the lean thinking model.
To provide an overview of the concept of supply chain and supply chain management.
To illustrate that the supply chain can be made efficient and effective when applying lean.
To study the different elements and techniques of lean. To compare and contrast the principles of lean in the aerospace and the construction industry.
To show the future of lean management.
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Introduction and Structure of Dissertation
1.3 Methodology The dissertation methodology was organised into four major parts:
Once the topic of my dissertation; Information requirement of the Lean thinking model, was decided, the next involved planning and preparation of the dissertation. In this stage, the scope and the limitations of the dissertation was considered based on which the aim and objectives was written. A rough dissertation plan was drawn estimating the time and resource requirement for each dissertation activity. The reason to have a plan was to proceed in an organised manner and to monitor progress at every step and also as a basis of re-planning when the unexpected happens.
The second part of the methodology involved and intensive literature search on the lean thinking model, theories and practices of the Supply chain industry, construction industry and aerospace industry. Also literature search was done on the applications of lean in the above industries. The source of such data was from extensive range of information sources, such as: a wide range of written literature including books, journals, and the electronic medium (World Wide Web); also detailed discussions with professors who had knowledge on the respective topics.
The third and important part was the literature review and the analysis. First aim was to study and understand the concept of the lean thinking model and how it can be applied in different industries. Secondly, the natures of the Supply chain industry and how it can be made efficient with application of the lean thinking model. Thirdly, to show a wider scope of the concept of lean; comparing the lean model within the aerospace and construction industry proving that it can be applied successfully in any industry.
Fourthly and finally, were the structure of the dissertation and the compilation of the data and the critical analysis.
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Introduction and Structure of Dissertation None of this would have been possible without my dissertation supervisor. A consistent meeting with the supervisor was perhaps the most valuable activity in the preparation of this dissertation. 1.4 Limitations The dissertation was influenced by the following limitations.
A. The biggest limitation that the dissertation faced was the fixed time scale. The time scale was undoubtedly short. There was not enough time to carry out a detailed literature analysis on the topic. Also the time scale did not permit to conduct interview with the leading manufacturing, construction and aerospace companies implementing the lean thinking principles.
B. The dissertation was characterised by low budget. This prevented the enrolment of seminars and reports organised by companies. It also prevented the purchase of expensive seminars, conferences material and books.
C. Due to shortage of time, quantitative analysis of the benefits of lean could not be carried out but an effort has been made to explain the benefits qualitatively with the help of case studies and examples.
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Introduction and Structure of Dissertation
1.5 Structure of the dissertation
The dissertation has been prepared into six chapters including this one, to validate the aim and objectives. The dissertation has been structured in a way that the concept of lean is firstly understood, secondly its efficiency in another industry and finally the wide scope of the concept. A better understanding of the structure of the dissertation is given in detail below.
A decade ago, if anyone in any industry or company was asked, ‘What is lean?’ a majority of them never knew the answer to this question. But this very concept has changed the entire process system of many companies enabling them to earn better efficiencies. The concept of lean was born in Toyota – Japan and it was called the Toyota Production System, after which Womack and Jones (1996) coined it the term lean. It was coined lean for the view centred on the elimination of waste with the goal of creating value. The lean thinking system focuses on the five principles and Muda which are the basis for the concept of lean in the different industries. So, for the implementation of lean in any industry, it is very important firstly, to understand the lean thinking system which is why the second chapter explains about the five principles of lean and the value it creates when applying these principles. It also shows the various Muda which can be identified and eliminated in the different processes of the companies.
Today's business climate has rapidly changed and has become more competitive as ever in nature. Businesses now not only need to operate at a lower cost to compete, it must also develop its own core competencies to distinguish itself from competitors and stand out in the market. In creating the competitive edge, companies need to divert and apply innovative concepts to focus on areas like supply chain. But why supply chain? This is because the supply chain plays an important role for the success of any product, company, or industry. The supply chain helps the company to connect both the upstream suppliers and the downstream customers without which no industry 15
Introduction and Structure of Dissertation can survive. Therefore applying concepts like lean into the supply chain of the organisation are the ways in which they can have a competitive edge over its competitors. The third chapter explains the concept of supply chain, and then it focuses on the concepts of lean in the supply chain.
As we already know, lean thinking focuses on the five principles to create value and on the identification and the elimination of waste. But the implementation of lean in any industry is not possible just by applying these rules. Lean implementation is successful and efficient only when there is a combination of the lean thinking system and the lean thinking elements and techniques. The Fourth chapter focuses on explaining the principles and concepts of these elements and techniques. It also shows that the techniques when applied benefit the lean thinking system and helps the lean management in the successful implementation of the concept.
The misconception about lean is that people believe that lean is a concept which can be applied only in the manufacturing industry. This is not true as lean is a universal concept. Just as much as lean principles are applied in the manufacturing industry, it can be applied in the aerospace, construction and other industries and generate affirmative results. The fourth chapter compares the principles of lean in the construction and the aerospace industry. It shows how the principles are applied to the industry but in different ways.
Finally in the last chapter, the entire dissertation is summarised by showing that the aim of the dissertation is accomplished. It ends by discussing about the future of lean thinking.
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Introduction and Structure of Dissertation
CHAPTER TWO
LEAN THINKING VS MUDA
2.1 Introduction Muda the one word of Japanese we all need to know. It sounds really awful as it rolls of our tongue and it should, because Muda means “waste”. According to James P. Womack (2003) “specifically any human activity which absorbs resources but creates no values” is called waste. It involves mistakes which require rectification, production of items no one wants so that inventories pile up, processing steps which are not actually needed, transport of goods without a purpose, people in the downstream activity standing around waiting because the upstream activity has not delivered on time and goods and services which don’t meet the needs of the customer.
Fortunately, there is a powerful antidote to Muda: lean thinking. Lean thinking provides a way to specify value and line up value creating actions in the best sequence, and if the lean thinking principles are practiced effectively, Muda can be completely eradicated from the process. (Womack et al., 2003)
In short lean thinking is lean because it provides a way to do more and more with less and less – less human effort, less equipment , less time and less space – while coming closer and closer to the providing the customers with what they want. (Hogg, 2007)
In today’s day and age where competition has no bounds, the one thing companies are adopting to become competitive and improve their operating efficiency and profitability are the principles of lean thinking. It has been describes as the quest for “brilliant process management”.
Lean thinking - a way to convert Muda into value.
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Lean Thinking VS Muda
2.2 The Concept in Detail Though the concept of lean is rooted in the manufacturing industry, the principle of lean thinking is universal and can be applied successfully in a wide range of industries- not just in traditional production environment but also in service industries, software
development,
construction,
complete
supply
chain.
(Construction
Excellence, 2004)
Lean Production is ‘lean’ as it uses less of everything when compared with mass production- half the human effort in the factory, half the inventory, half the manufacturing space, half the investments in tools, half the engineering hours to develop a new product in half the time. The advantage of keeping half the inventory on site is that, it results in fewer defects, and produces a greater variety of products. Michael Dell, while on tour with a large customer saw technicians customising the new Dell computers with their company ‘standard’ hardware and software when the host asked “Do you think you guys can do this for me”, without waiting he replied “Absolutely we’d love to do that”. With in weeks the, Dell was shipping computers with factory installed, customer specific hardware and software. What took the customer an hour could be done in the factory in minutes and further more computers can be shipped to the end user rather than making a stop in the corporate IT department. Shortening the value chain is the essence of lean thinking (Poppendieck, 2002). Companies which rethink the value chain and who find ways to provide their customer value with significantly fewer resources than their competitors can develop an unassailable competitive advantage. The principles of lean are :( Construction Excellence, 2004)
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Lean Thinking VS Muda
The Lean Principle: Eliminate Waste Precisely specify Value from the perspective of the ultimate customer Clearly identify the process that delivers what the customer values ( the Value Stream) and eliminate all non value adding steps Make the remaining value adding steps Flow without interruption by managing the interfaces between different steps. Let the Customer Pull - don’t make anything until its needed, then make it quickly Pursue Perfection by continuous improvement Figure 2.1: Lean Thinking Principles…
Lean Thinking is designing and operating the right process and having the right systems, resources and measures to deliver things right first time. The primary focus is on moving closer to providing a product that customers really want, by understanding the process, identifying the waste within it, and eliminating it step by step. (Poppendieck, 2002)
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Lean Thinking VS Muda
Lean Thinking focussed on value more than cost and seeks to remove all the non value adding components and (especially) processes, while improving those that add value. It aims to define value in customer terms, identifying key points in the development and production process where that value can be added or enhanced. The goal is seamless integrated process (Value stream) where in products ‘flow’ from one value adding step to another all driven by the ‘pull’ of the customer. (Construction Excellence, 2004) As Lean focuses on the elimination of waste in its process, it is important to know that Taiichi Ohno (1912 – 1990), the Toyota executive was the first to identify the first seven types of Muda which will be discussed in detail in the third chapter. There are probably more than seven, but as said Lean is a concept which can be applied in different industries, so Muda and the source of Muda will differ from industry to industry but the philosophy of converting Muda into value is what matters in the concept of lean thinking. (Womack et al., 2003)
2.3 History and Evolution of Lean Thinking
Today many people believe that the concept of lean or lean manufacturing and its practices were developed by and for the Toyota manufacturing System. This is correct to certain extent. But when taking the concept of lean thinking, its history actually dates back a little more than that.
The lineage of lean thinking practices in manufacturing and Just in Time (JIT) Production goes back to the time of Eli Whitney (1765 -1825) and his concept of interchangeable parts. Eli Whitney is famous as the inventor of cotton gin. However the gin was just a minor accomplishment when compared to his perfection of the interchangeable parts. (Bodek, 2004; Flinchbaugh, 1998) In the U.S., Eli Whitney saw the potential benefit of developing interchangeable parts for the fire arms of the U.S military, and in 1798, he build around ten guns all containing the exact parts and mechanism, and disassembled them before the congress. He placed all the parts in a pile and reassembled all the weapon right in front of the congress. 20
Lean Thinking VS Muda For the next 100 years manufacturers primarily concerned themselves with individual technologies. During this time our system of engineering drawings developed, modern machine tools were perfected and large scale processes such as the Bessemer process for making steel held the centre of attention. But as products moved from one discrete process to the next through the logistics system and within factories, few people concerned themselves with:
What happened between processes?
How multiple processes were arranged within the factory?
How the chain of processes functioned as a system?
How each worker went about a task?
This changed in the late 1890's with the work of early Industrial Engineers. Frederick W. Taylor (1856 -1915) began to look at individual workers and work methods. The result was Time Study and standardized work. He called his ideas Scientific Management. The concept of applying science to management was sound but Taylor simply ignored the behavioural sciences. In addition, he had a peculiar attitude towards factory workers. Frank Gilbreth (1868 -1924) (Cheaper by the Dozen) added Motion Study and invented Process Charting. Process charts focused attention on all work elements including those non-value added elements which normally occur between the "official" elements. Lillian Gilbreth (1878 – 1972) brought psychology into the mix by studying the motivations of workers and how attitudes affected the outcome of a process. There were, of course, many other contributors. These were the people who originated the idea of "eliminating waste", a key trend in JIT and Lean Thinking. (Bodek, 2004)
Starting about 1910, Henry Ford (1863 – 1947) and his right-hand-man, Charles E. Sorensen, fashioned the first comprehensive Manufacturing Strategy. They took all the elements of a manufacturing system-- people, machines, tooling, and products-and arranged them in a continuous system for manufacturing the Model T automobile. Ford was so incredibly successful he quickly became one of the world's richest men 21
Lean Thinking VS Muda and put the world on wheels. Ford is considered by many to be the first practitioner of Just in Time and Lean Manufacturing. But then the world began to change, the Ford system began to break down and Henry Ford refused to change the system. For example, Ford production depended on a labour force that was so desperate for money and jobs that workers would sacrifice their dignity and self esteem. The prosperity of the 1920's and the advent of labour unions produced conflict with the Ford system. Product proliferation also put strains on the Ford system. Annual model changes, multiple colours, and options did not fit well in Ford factories. (Sorensen, 1956) At General Motors, Alfred P. Sloan (1875 -1966) took a more pragmatic approach. He developed business and manufacturing strategies for managing very large enterprises and dealing with variety. By the mid 1930's General Motors had passed Ford in domination of the automotive market. Yet, many elements of Ford production were sound, even in the new age. Ford methods were a deciding factor in the Allied victory of World War II. (Womack et al., 1996) Ironically, Henry Ford hated war and refused to build armaments long after war was inevitable. However, when Ford plants finally retooled for war production, they did so on a fantastic scale as epitomized by the Willow Run Bomber plant that built "A bomber An Hour." Now the Allied victory and the massive quantities of material behind it ("A Bomber An Hour") caught the attention of Japanese industrialists. They studied American production methods with particular attention to Ford practices.
At Toyota Motor Company, Taiichi Ohno (1912 – 1990) and Shigeo Shingo, began to incorporate Ford production and other techniques into an approach called Toyota Production System or Just in Time. They recognized the central role of inventory. The Toyota people also recognized that the Ford system had contradictions and shortcomings, particularly with respect to employees. With General Douglas MacAurthur actively promoting labour unions in the occupation years, Ford's harsh attitudes and demeaning job structures were unworkable in post-war Japan.
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Lean Thinking VS Muda Toyota soon discovered that factory workers had far more to contribute than just muscle power. This discovery probably originated in the Quality Circle movement. Ishikawa, Deming, and Juran all made major contributions to the quality movement. It culminated in team development and cellular manufacturing. (Bodek, 2004) Another key discovery involved product variety. The Ford system was built around a single, never changing product. It did not cope well with multiple or new products. Shingo, at Ohno's suggestion, went to work on the setup and changeover problem. Reducing setups to minutes and seconds allowed small batches and an almost continuous flow like the original Ford concept. It introduced a flexibility that Henry Ford thought he did not need. (Womack et al., 1996) All of this took place between about 1949 and 1975. To some extent it spread to other Japanese companies. When the productivity and quality gains became evident to the outside world, American executives travelled to Japan to study it. They brought back, mostly, the superficial aspects like kanban cards and quality circles. Most early attempts to emulate Toyota failed because they were not integrated into a complete system and because few understood the underlying principles. Norman Bodek first published the works of Shingo and Ohno in English. He did much to transfer this knowledge and build awareness in the Western world. Robert Hall and Richard Schonberger also wrote popular books.
By the 1980's some American manufacturers, such as Omark Industries, General Electric and Kawasaki (Lincoln, Nebraska) were achieving success. Consultants took up the campaign and acronyms sprouted like weeds: World Class Manufacturing (WCM), Stockless Production, Continuous Flow Manufacturing (CFM), and many other names all referred to systems that were, essentially, Toyota Production System. Gradually, a knowledge and experience base developed and success stories became more frequent. In 1990 James Womack wrote a book called "The Machine That Changed the World". Womack's book was a straightforward account of the history of automobile 23
Lean Thinking VS Muda manufacturing combined with a study of Japanese, American, and European automotive assembly plants. What was new was a phrase-- "Lean Manufacturing." Lean Manufacturing caught the imagination of manufacturing people in many countries. This is how the concept of lean thinking evolved into what it is today. Though pioneered in the car manufacturing industry in Japan, it has been implemented successfully in the American, European manufacturing industry and is being applied widely outside the automotive industry. (Garnett, 1998; Murman et al., 2002)
2.4 Perspectives on Lean
In 1990 Jones, Womack and colleagues published the book ‘The Machine That Changed the World’ as a description of the Toyota Production Systems , and coined the term Lean. The book itself was an offshoot of their research project, funded by the Western automobile manufacturers, to define World Class in automotive manufacture. The answer, Toyota’s system, did not surprise anyone in the industry, but what the research failed to adequately address was not what Lean was, but how to implement the concept of lean. (Jones, 1999)
There are at least three different perspectives on Lean.
The first was Shigeo Shingo ’s industrial engineering perspective: There are currently ongoing debates about Shingo’s influence on the Toyota system. The facts are that he taught Industrial Engineering courses at Toyota for over 25 years from 1955 onwards. He taught the very people who implemented Lean the engineering principles behind it. He saw Lean in terms of Non-Stock Production – producing with minimal inventory. Shingo was a theorist as well as an engineer, and his theory was articulated as far back as 1946. The theory was that manufacturing is a network of process (product flow) and operations and that non-stock production meant focusing on flow not individual operational efficiency. He derived this from Henry Ford’s dictum that the longer anything is in the factory, the more it costs, at exactly the time when Sloan and GM were doing the direct opposite. How much Toyota was influenced by this theory, or 24
Lean Thinking VS Muda how far Shingo’s theory is just an explanation of Toyota’s developing practice is being debated, but there is a match between theory and practice.
The second perspective is Professor Fujimoto’s Evolutionary Learning perspective: This is detailed in his book ‘The Evolution of a Manufacturing System at Toyota. The evolutionary perspective is particularly valuable in explaining why the Toyota Production System works. Professor Fujimoto identifies three characteristics of the Toyota learning system – reliable standard methods, reliable standard problem solving techniques and experimentation. Again, Toyota would never describe them in this way, although they would applaud the emphasis on standard methods. An example of a multiple perspective approach would be to consider Jidoka, autonomation. In most descriptions this is one of two pillars of the Toyota Production System , but it is interpreted in very different ways. Jidoka is essentially a process to decouple people from machines. It was the foundation of Toyota’s original weaving loom business as Mr Toyoda patented a device to stop a loom as soon as a thread broke. This meant that workers did not have to closely watch looms, prepared to react to a break in the thread. The word came to be applied to any system that allows a machine to take action in response to problems, rather than rely on the observation of an operator. From an engineering perspective, it is a form of automation designed to eliminate waste – the waste of an operator watching a machine, rather than performing value adding work. From a process management perspective it is a form of Poka-Yoke – enabling the process to inspect itself and using this in-process inspection to stop defects being passed on to other operations or the customer – it is a form of process control. From a learning perspective it is a way of releasing people from the drudgery of watching machines, enabling them to engage in value-adding activity.
25
Lean Thinking VS Muda This third perspective has seen it interpreted as ‘Respect for People’: How you interpret Jidoka effects how you try to implement Lean. Do you see it as a way of removing waste from the process, a way of controlling processes or a way of developing people? In reality it is all three, and we need to acknowledge all three in our attempts to emulate the success of Toyota, which is ultimately the goal of businesses implementing lean. A narrow waste elimination perspective misses a lot. Many companies have struggled to implement lean approaches. One reason may be that they have too narrow an understanding of lean, and have attempted to copy the superficial elements of the process, rather than understanding the place of these elements in a lean system. A multi-perspective approach can help avoid this and should be part of the learning process for all the lean leaders. (Jones, 1999) 2.5 Principle of Lean Thinking Lean Overview For any organisation, before they embark on a change programme, regardless of any intention, there need to be some fundamental ingredient that needs to be in the right place to ensure future success for the organisation. Most of the time, organisation adopt a programme of change that are not clearly understood throughout the business, they are often labelled as initiatives. Indeed the word ‘initiative’ alludes to something that will enable the business to get out of the current crisis only. To sustain the benefits of lean, the following must be understood and communicated in order to create an environment that can accept a change transformation. They are: Why should we change? •
What is the need for change? What happens if we don’t change?
Where do we want to be? •
What is the vision?
Who will be involved? •
What capacity can be committed to support this change programme? How can we involve our people?
What should we do now? •
Is there a strategy for change? Do we have objectives for a business& plans to achieve them? 26
Lean Thinking VS Muda It is possible that any of the previous failed attempts to change in the organisation could be of the fact that, they were weak in any of the above. But for an organisation to realise the true benefits of lean, it is very important that the business must look beyond the ‘current crises to the future challenges such as how will the market change? How will we need to function? Who are our customers? Etc. The organisation needs to realise that the process is continuous which can be very difficult to conceptualise. Though the sections below are going to describe the principle, the core element to the success of this type of change is the development of people through involvement (Kedem, 2003). Products, tools, systems, techniques etc can be mimicked in any organisation but it is the people that offer the greatest potential for differentiation to their competitors.
2.5.1 Value
Specify Value The customer is the only reason why a business exist, therefore it is very important to understand what the customer actually requires which is essentially the strategy of a lean organisation - Who are they, what do they want, how do they want and when do they want should be clearly defined. It is very important for an organisation to realise that these definitions are likely to change in a highly competitive environment. Organisations which ignore such changes will ultimately fail in the long run. Therefore it is very important for a lean organisation to specify the value of its end product which it’s going to deliver to the end customer. According to Womack et al. (2000) the concept of value can be best described as the element of the product/ service that the customer is willing to pay for. (Womack et al., 2003)
Due to increase in competition and globalisation, the market price for a product is no longer determined by the producing organisation. The customer has now the power to define the market price. For a lean organisation to remain profitable, they must concentrate on how to maximise the value and how they create it in their product or service (Wood, 2004). Because of such focus on value, the lean practitioners need to work close with the customer specifying and creating value, But where to start? 27
Lean Thinking VS Muda Start by challenging the Traditional definition of ‘Value’ Let us consider a real life example of specifying value from the book ‘Lean thinking’ by Womack and Jones. Steve Maynard, the vice president for engineering and product development at the Wiremold Company was trying to deal with the very problems of bringing about a change in the product development system of the company. Wiremold developed new products through a conventional departmentalised process. The system was generally when an opportunity was identified; usually a gap in the market or a weakness in the product of the competitor, a design was developed by the product engineer immediately, and then tested by the prototype group. If it worked according to specification, the design proceeded to the engineers designing the machines to make the products and finally it went into production. This system by Wiremold Company produced designs lacked imagination which the customers often ignored. Simply speeding up the process through simultaneous engineering and then broadening product variety would jut bring in more bad designs to the market- ‘Pure Muda’ To overcome this problem and traditional system, Steve Maynard’s solution was to develop a team for each product to stick with the product during its entire production life. The team – consisting of a marketer, a product engineer, and a process engineerproceeded to enter into dialogue with the leading customer in which all of the old products and solutions were ignored. Instead they focused on the value the customer actually needed. As the new system was adopted, it developed product with exact specification of how the customer wanted. In two years, the sales of these products increased by more than 40 percent and the gross margin soared. So companies like Wiremold and others need to search for new capabilities that will permit them to create value in unimagined dimensions for the customer.
Value definition in terms of the whole product Another reason a company finds it difficult to get its value right is because value creation often flows through many firms and this tends for firms to define value in different ways to suit their own need. When different definitions of value are added 28
Lean Thinking VS Muda up, they generally don’t create any value. So its very important to remember that when a company defines value, it should define it in terms of the whole product and not just its own interest. 2.5.2 Value Stream “Whenever there is a product for a customer, there is a value stream. The challenge lies in seeing it.” Mike Rother & John Shook, Learning to See
Once Value has been specified, the next step is to identify the Value stream. The value stream is all the specific actions required to bring a specific service or product through three critical activities in any business: Product/Service definition – from concept through detailed planning through launch Information management – from order taking through detailed scheduling to delivery Physical transformation – initial concept, to the receipt of the service/product by the customer. The identification of the value stream makes the specific value flow through the system (Chitturi, 2007). Identifying the value stream also exposes enormous amounts of waste in the form of unnecessary steps, backtracking, and scrap, which travels from department to department and company to company. (Womack et al., 2003)
Womack and Jones (Lean Thinking, 1996) visualize the value stream as this: raw materials along with knowledge and information enter the system upstream (the suppliers); and, products or services of value flow out from the system downstream (the customers). The individual processes that take place in between are those that add value to the product or service as it flows through them. It is a simple but powerful model. If an activity or process does not add value, it is eliminated. Understanding the value stream is to gain a clear understanding of the various families and the associated processes that are required to manufacture them. Generally such information is not very clear. In order to understand the various value streams in the organisation or in a manufacturing process, a Product Family Matrix can be used. (Womack et al., 2003)
29
Lean Thinking VS Muda Product Family Matrix To create a product family matrix, we need to list our products down to the left of the column. Then we process steps, working backward form the customer along the top. In many cases it is not necessary to list all the steps. Usually it’s the ones closer to the downstream are enough for us to differentiate product families. After we have listed the products, we look at the products which have a common process so that these products can be grouped into families. Figure 2.1: Product Family Matrix…
Source: Lean Thinking- Banish Waste and Create wealth in your Organisation By Womack and Jones, (2003) ‘Downstream’ are those steps which are closer to the customer and ‘Upstream’ are the steps closer to the raw material. The process steps need to be identical, so that later on a flow can be created in a way that products can pass through each step with some slight detours if required. What is amazing is that the results found from the usage of this tool. For e.g. some products which were totally different form each other are having a common set of process steps, so that in such cases they can be grouped in to product family matrix. 30
Lean Thinking VS Muda With the help of this we can understand how value added and non value added activities have an effect on the product as it progresses from raw material to handover to the final customer. To illustrate this information we can use Value stream Maps. Value Stream Maps The Value Stream Map is used to illustrate both the ‘Current State’ and the desired ‘Future State’ of a process. The map contains the following information: (Womack et al., 2003)
1. Customer/Supplier 2. Material push, pull, flow etc 3. Inventory 4. Processes & process data 5. Information Flow (electronic/verbal/written etc) 6. Relationship between lead time & actual in process time
The Value Stream Map highlights the 7 Wastes and is used to provide a basis for developing plans to implement lean tools and techniques. Given below is an example of a value stream map. (Please turn over)
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Lean Thinking VS Muda Figure 2.2: Value Stream Maps…
Source: (National Research Council, 2004) The value stream map, developed at Toyota, is a tool that: allows you to diagram your current value stream; Identifies the bottlenecks that prevent you from making what your customers want, when they want it; Develops a vision of what your future lean system should look like.
Value stream mapping gives you the “Aha!” feeling – things become obvious. Easy Steps to Mapping the Value Stream: (National Research Council, 2004) Select the product or product family you want to map. You may want to begin with your biggest customer and select the product you deliver to them. Draw the current state value stream map. Draw the future state value stream map. Implement the action plan.
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Lean Thinking VS Muda Value Stream for a Cola Carton This is a case study developed by Nick Rich of the Lean Enterprise Research Centre and presented in the book Lean thinking by Womack and Jones. But before looking into it, we have to understand that in the production process there are three types of work.
Value added: that is the work what the customer is prepared to pay for Non Value added: that is what the customer is not prepared to pay for, but is an integral part of the production process Waste: that is what the customer is not prepared to pay for in the production process.
There are 7 integral wastes that have been identified in the production process such as transport, inventory, motion etc which will be discussed in detail in further chapters. When looking into the value stream for a carton of cola, the results of the study conducted is fairly horrific, it involves a lengthy set of actions extending to over three hundred days, most of which consume resources but creating no value at all and is therefore Muda (Womack et al., 2003)
When looking at the raw material required in manufacturing a cola can. It requires water which is supplied from the local water authority, and then other basic ingredients such as the ‘essence’. The other raw materials are beets for sugar, corn for caramel, colouring agent, fir trees for cardboard to make the cartons and bauxite and aluminium for the can. Since the can was the most complex aspect in terms of identifying the value stream, the analysis was done on the flow of aluminium as the other ingredients join the stream further down the valley.
33
Lean Thinking VS Muda
Figure 2.3: Value Stream for Cola Cans…
Source: Lean Thinking- Banish Waste and Create wealth in your Organisation by Womack and Jones, (2003)
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Lean Thinking VS Muda Table 2.1: The Value Stream details of Carton of Cola…
Processes
Incoming Storage
Processing Time
Finished Storage
Process Rate
Cum Days
Cum Scrap
1
Mine
0
20 min
2 weeks
1000 t/hr
319
0
2
Reduction mill
2 weeks
30 min
2 weeks
305
0
3
Smelter
3 months
2 hrs
2 weeks
277
2
4
Hot rolling mill
2 weeks
1 min
4 weeks
4 ft/min
173
4
5
Cold rolling mill
2 weeks
< 1 min
4 weeks
2100ft/min
131
6
6
Can maker
2 weeks
1 min
4 weeks
2000/min
89
20
7
Bottler
4 days
1 min
5 weeks
1500/min
47
24
8
Tesco RDC
0
0
3 days
8
24
9
Tesco Storage
0
0
2 days
5
24
10
Home Storage
3
5 min
3
[90]
Total
5 months
3 hours
6 months
24
Source: Lean Thinking- Banish Waste and Create wealth in your Organisation by Womack and Jones, (2003) ♦
Cumulative scrap is the percentage of the original aluminium scrapped. The jump in scrap at the maker is due to the loss of about 14 percent of material in the punch. The loss from the bottler is mainly from damaged cans rejected as they are loaded in the filling machinery.
♦
The jump in scrap rate at the home of the customer, show in brackets, is the consequence of recycling only 16 percent of the 76 percent of the original aluminium which reaches the customer.
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Lean Thinking VS Muda From the table it is clearly seen that the amount of time value is actually being created is about three hours which is infinitesimal when compared to the total time of three hundred and nineteen days from bauxite to recycling bin. Firstly more than 99 percent of the time the value stream is not flowing at all: Muda of waiting. Secondly the can being picked up and put down more than thirty times, from the customers perspective none of this will add value: Muda of transport. Thirdly the cans are moved through fourteen storage lots and warehouses, and the cans are palletized and unpalletized four times: Muda of inventory. Fourthly and finally around 24 percent of the energy intensive and expensive aluminium never makes it to the customer: Muda of defects (causing scrap)
From here, it is seen how the identification of the value stream helps in the showing the amount of actual value and waste created. This helps the enterprise in making necessary changes. Given below is the entire value stream of Cola cans.
Figure2.5: Confluence of Cola Value Streams
Source: Lean Thinking- Banish Waste and Create wealth in your Organisation By Womack and Jones, (2003) 36
Lean Thinking VS Muda 2.5.3 Flow The next stage in the lean principle after the identification of the value stream is Flow. According to Womack et al. (2003) Flow is defined as producing a product from raw material to completion without unnecessary interruption or delay (i.e. waste). The aim is to achieve single-piece flow in each process, ensuring work flows smoothly from one stage to the next, one at a time, increasing flexibility, thus reducing work in progress, parts movement, parts handling, quality defects and therefore, the lead time. It is about how the items or people that we are processing move from the start to the end of our interaction with them. It is about what happens to them and how the process overall compares to what could be seen as a perfect process. Many of principles of Flow are linked with Just-in-Time (JIT). These state that the best way to run a process is to use the minimum re source and minimum elapsed time to move an item from the start to end of the process. Flow is also about having a highly efficient process system.
Why Do We Get Poor Processes? An obvious question is why the processes we operate at the moment are not Lean. There will be many reasons. The first is that in the real world we will never get a perfect process. There will always be some room for improvement, cost reduction and cycle-time reduction. However, the reason why most business processes are so far away from perfection is not that achieving perfection is impossible, but rather that we have never attempted to reach, or even define, perfection. (Ad Esse Consulting, 2007)
The reasons for not achieving what would be regarded as a Lean process are:
No understanding of what ‘good’ looks like. The processes are not designed No understanding if the current processes well enough No comparison made against perfection Optimisation of individual steps and not the whole process
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Lean Thinking VS Muda Principle of Lean Flow Good processes are designed with a few, very simple principles in mind. (Ad Esse Consulting, 2007)
Lean Flow is:
Focus on value- adds. For each step we need to be sure that it is adding value from the customer’s perspective. Many steps in a process add no value at all.
The time for any individual item or person being processed to move from the start to the end of the process should be as short as possible. Elimination of waiting time in a process should be one of the key concerns.
Work should be pulled through the process rather than pushed. Demand from downstream should define activity upstream.
Batching should be avoided wherever possible. Doing anything before it is required by the next step in the process is overproduction and should be avoided.
No duplication of activity. Duplication should be eliminated, usually by improving the quality o f the initial process step.
Techniques of Flow The concept of flow in lean thinking plays a vital role when applied in any industry. Although applying flow to the full range of human activities will not be easy or automatic. For managers who are new to the concept will find it hard to even see the flow of value and therefore grasp the value of flow.
38
Lean Thinking VS Muda So how do we make this concept of value flow continuously in our system? First once value is defined and the entire value stream is identified it is important to focus on the actual object- the specific design, the specific order and the product itself. To second step in order to make the first step possible is by ignoring the traditional boundaries of jobs, carriers, functions and focussing on becoming a lean enterprise removing all impediment to the continuous flow. The third and final step is to rethink specific work practices and tools to eliminate backflow, scrap etc so the production of the specific product can proceed continuously. Generally all these three steps have to be processed continuously. (Womack et al., 2003) To make this approach understandable, let’s take a concrete example of the design, order and production of bicycle from the Lean Thinking of Womack and Jones. The reason the authors had selected this as a study is due to the disintegrated nature of the bicycle industry, with the final assembler making only the frame and buying the rest of the components from numerous suppliers.
Design Traditionally in the bicycle industry, it worked on the principle of batch and queue when only a need was addressed by the marketing department, the product engineers would design a product to serve the need. The design for a new product moves from department to department, waiting in the queue in each department. Most times it returned to previous departments for rework or change in the raw material. There was no flow in the process. Also a major disadvantage in the traditional practices were that the product team was just a committee of staff that send the bulk of the actual developments work back to the departments, where it still waited in queue. There was lacking a standardized approach to the flow of material. But taking the lean approach, it aims to create truly dedicated product teams and all the right skills needed to conduct value specification, general design, detailed engineering, purchasing, tooling, and production planning in one room in a short period of time using a proved team decision making methodology commonly called Quality Function Deployment (QFD). This enables the team to standardise the work also so that the same and the efficient approach can be followed every time.
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Lean Thinking VS Muda Order – Taking The historic practices of order taking in the bicycle industry have been to task the sales department with obtaining orders from the retailers. Once the orders are fully processed and to make sure that the buyers are credit worthy, they are send to the scheduling department in operations to work the algorithm for the firm’s product. Then the shipment date is sent back to the sales and to the customer. To check the progress of the sales, the customer call the sales and the sales in turn calls the scheduling which leads to the wastage in time of communicating from department to department. In the lean enterprise or when applying lean, the sales and the production scheduling are considered to be core members of the product team. They are in a position to plan the sales campaign as the product design is being developed and sell with a clear eye of the capabilities of the production system so that both orders and the product can flow smoothly from sale to delivery. One of the tools used by lean to implement this approach is takt time, which precisely synchronises the rate of production to the rate of sale to customers. This tool is very important for the success of calculating the production slot in a lean enterprise, the concept of this tool will be discussed and explained in further chapters.
Production In the past, practices in the bicycle industry was to differentiate production activities by type and to create department for each type of activity such as tube cutting, tube bending, mitering, welding, washing, painting and the final assembly of the final parts. Through time higher speed machines with higher level of automation were developed for task ranging from cutting and bending to welding and painting. The changing over part fabrication tools to make a different part was time consuming so it was ideal to make batches of each part before changing to run the next part.
40
Lean Thinking VS Muda
Figure 2.5: Bicycle Plant layout and Flow…
Source: Lean Thinking- Banish Waste and Create wealth in your Organisation By Womack and Jones, (2003)
As batches were made, it lead to the Muda of inventory and problems also rose on how to keep inventory of all the part and to make sure that the right parts were sent to the right operations at the right time. In the early days inventory was hand written, and then by 1970s came out a computerised Material Requirements Planning (MRP). A good MRP was said to be 99 percent accurate in keeping track of the inventory, order taking and sending instruction to each department. But eventually MRP had a number of problems. Even a single wrong entry into the system led to Muda of waiting and Muda of over production. The concept of Just in Time (JIT) pioneered by Toyota in the year 1950 was applied in the bicycle industry. But this too failed as it ignored the need to reduce the set up times and smooth the schedule. Instead it concentrated that the suppliers delivered the material at the right place but just in time to meet the production schedule.
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Lean Thinking VS Muda But to get manufactured goods to flow in a lean enterprise, it takes the critical concept of JIT and level scheduling and carries them all the way to their logical conclusion by putting products into continuous flow wherever possible. In the case of the bicycle plant, flow thinking calls for the creation of production areas by product family which includes every fabrication and assembly step.
Another lean methodology by addressing the noise problem, the lean group, the product manager, the part buyer, the engineer all in close contact with the product and the tool engineer in the plant dedicated to the product family. Its very important that the entire team work together supporting each other to solve production problems and implement improvement in the process. (Womack et al., 2003) Also there are other tools of lean which help to perfect the production stage in the bicycle plant. They are
Total Productive Maintenance Poka – Yoke 5 S’s Kaikaku exercise Kanban The above tools which permit the successful implementation of lean will be discussed later in another chapter.
42
Lean Thinking VS Muda
Figure 2.6: Lean bicycle plant layout and flow…
Source: Lean Thinking- Banish Waste and Create wealth in your Organisation By Womack and Jones, (2003) Right Location The other flow technique which needs to be mentioned is the right location both to the design and physical production. This needs to be appropriate to serve the customers needs. Generally to make matters worse, both these departments these days are located in two different parts of the world.
Flow thinking to any activity It is easy to see flow thinking in the conventional, discrete product manufacturing, which is where flow techniques were pioneered. But once a person has mastered the concept, it sure can be introduced into any activity in any industry. Till now we have seen what happens when a value stream flows smoothly. But this is not enough, what we need to know is what we are providing is what they actually want. This is why we need to look into PULL - the next principle in lean thinking.
43
Lean Thinking VS Muda 2.5.4 Pull ‘PULL’ our way to Profits. In the real world, every time an item which comes out of the production line, there will be a customer paying for it and ready to take it off our hands. It is this same customer who creates a pull across the value stream of the production line. The idea of Lean is simply to bring the real world as close as possible to that ideal world, and the concept of Pull in lean thinking is a primary key in becoming “lean.” (Womack et al., 2003) Pull - letting our customers “pull” product through your production system as they need it, rather than “pushing” product through your production pipeline and accumulating it in inventories against forecast future sales — is such a simple concept with such obvious benefits, we’d think that every manufacturer on the planet would be doing it, but they aren’t. Why not? Because designing and implementing a Pull system can be very complex, both physically and politically, especially if you’re heavily invested in a more traditional (albeit, more wasteful and costly) Push system. It’s hard to know where to start, and what to change first. (Hinter, 2004)
Figure2.7: Push Vs Pull system…
Source: http://elsmar.com/Pull_Systems/img010.jpg 44
Lean Thinking VS Muda Pull - a system that is adopted when we see that value is not able to flow throughout the value stream. Under the pull system it ensures that the production/withdrawal of parts occurs only when the customer requirement are communicated up the value stream processes. This can be made successful with the use of visual communication media called Kanban. The traditional practices followed the push system in which operations are triggered by material and labour availability rather than customer demand. Variability and unreliability of processed with in the production system leads to bottle necks and Muda of overproduction.
Some Characteristics of Success In companies that have successfully implemented pull systems, there are certain characteristics beyond the traditionally obvious ones. The following are based on a composite of those companies. (Krupp, 1999)
Although many companies have specific continuous improvement programs, the most successful use a matrix approach to continuous improvement activities.
A permanent structure is in place, sometimes based on “5S” teams. The scope of these teams goes far beyond the scope of housekeeping that “5S” normally implies, however, and actually covers virtually all continuous improvement activities involving the shop floor.
Preventive and predictive maintenance programs are in place to ensure that, where feasible, major overhauls of equipment are performed on a scheduled and proactive basis. The program is supplemented by a productive maintenance program, in which the operators are charged with more frequent simple monitoring and maintenance of equipment.
A “last piece inspection system” is in place—tooling is inspected at the end of a production run.
45
Lean Thinking VS Muda All production lines use SPC (statistical process control), and most have also initiated SMED (single-minute exchange of die, a generic term used for programs that minimize equipment changeover/setup times).
Quality circles are used extensively. They are often a natural outgrowth of the 5S process.
As all other principles in lean thinking, the concept of pull also can be applied in any industry where lean is being applied. And as mentioned, one of the essential components to becoming lean and creating the smooth flow of value throughout the value stream is pull.
As mentioned earlier pull in its simplest terms means, that no one upstream should produce a good or service until the customer downstream asks for it. In reality it’s a little difficult to practice it. So let’s see how the concept of pull has benefited certain companies in the real world. This case is taken from the book Lean thinking by Womack and Jones. Awful production days The pull sequence at that time was started by a client of Sloane Toyota in Glenside who had to get a new bumper installed. It was at the same time that Toyota was taking a major step in synchronising its suppliers, distribution centres, and dealers so that customers could pull the flow of value all the way through a highly complex production system. (Womack et al., 2003) The same bumper which the client of Sloane damaged was manufactured in Bumper Works. But at that time in 1970, the company worked under the principle of batch and queue. They made chromed and painted steel bumpers in variety of styles which were made in large batches, say for a month before shifting to the next model after which they sold it to the dealers. Since large batches were normal, it took nearly sixteen hours to changeover. All the companies upstream and downstream of Bumper works like the chroming Company and the steel company worked under the same principle of batch and queue. Mr Khan in 1985 signed a contract with Toyota for a small volume of supplies.
46
Lean Thinking VS Muda There was one major problem, the production system in both the companies were varied. Mr Khan never knew how to implement this system but Toyota and its supplier firms promoted the concept of lean thinking in the American world.
Lean Production for Pull The few things that Toyota noted at bumper works were: -
massive inventories and batches
-
lack of flow
The solution to this was to reduce the changeover times and shrink the batch sizes. Toyota applied their standard formula that a machine should be available for production 90 percent of the time and down for changeovers about 10 percent of the time. Some of the other lean principles applied were: -
Plant being physically reorganised so the flat sheets flowed directly from the receiving dock and the blanking machines.
-
Shipping of the sheets was done at frequent intervals to the chroming operations.
-
A system was adopted were an operation started only when it was pulled by the next operation.
-
Takt time and shipping schedule became the pace maker of the entire operation.
-
Level scheduling was used to make a forecast of the future sales.
-
Kanban or signal card were used.
Though these concepts were implemented in Bumper works, there was another problem. The Chromer Company still operated under the principle of large batches. But Toyota and Mr Khan approached Chrome Craft to change their system helping them to apply the same concept of pull into their system. All these techniques together made Bumper works learn how to pull value through its system with lesser inventories, better quality, and lesser batches and over all a better system.
Awful distribution days It was a time when the Toyota production system was being implemented in the Toyota supplier’s plant in the Toyota city. None of the official did think about implementing the concept in the American warehouse of Toyota.
The parts
distribution centres (PDC) of Toyota were laid out in the same way as that of the 47
Lean Thinking VS Muda warehouses of America – vast bins stacked to a high ceiling, thousand of them, one for each part. These bins were lined in long rows to create endless aisles in a massive square of building. The distribution system then created a lot of Muda of time and inventory. The PDC received containers in large batches in weekly intervals. When received, it was opened and then given to the stocker who then used walk up and down the aisle placing the part in the correct bin. It required 15 days back in Japan to assemble an order, another 38days for ocean shipping, 5 days to bin the parts at the PDC, so overall, the Toyota PDC required an average of 60 days to order for un interrupted supplies to the Toyota dealer. Then a dealer like Sloane Toyota would order parts weekly from the PDC based on the demand seen from the previous week. If a particular part ordered by a customer was not there with the dealer like that of the same customer who wanted to change his bumper. A system would tell which PDC closest to the dealer had the part, and then they would take the order to the appropriate warehouse and get it shipped. These systems enable the part to be delivered the very next day. Such a system did not feel sufficient and efficient enough for the Toyota PDC’s that they decided to introduce the same practices of lean which was applied back in the Toyota city.
Lean distribution for Pull – theory into practice The actual logic of introducing the pull system in the warehousing that responds faithfully to the customer demand was introduced by the Toyota’s American executives. Getting this system in place took it couple of years though Toyota was a lean organisation. Some of the steps taken by the organisation to implement the pull system of lean in 1989 were:
-
The first step along this path was to reducing the bin sizes.
-
Relocation of the pasts by size
48
Lean Thinking VS Muda Stocking the spark plug or a truck fender on the same run was causing lost parts. As this was done, those parts which were demanded more frequently were moved to the start of the sorting and picking runs and the length of the aisle was reduced markedly.
-
Additional stocks were stored in reserves
-
When require they were moved to the active bins
Figure 2.8: Toyota PDC before Lean Thinking…
Source: Lean Thinking- Banish Waste and Create wealth in your Organisation By Womack and Jones, (2003)
The next step was at the end of 1990:
-
It involved the introduction of the concept of standard work and visual control.
-
Dividing the workday into 12 minutes cycle, this length was found to be the best compromise between walking distance and cart size in making rounds to load or unload a cart.
49
Lean Thinking VS Muda The next step took place in 1992:
-
The introduction of the kaizen activities – building work carts using scrap material and parts from the local building supply store.
In 1995:
-
The transition from weekly to daily orders from its dealer to do without the need of an additional head count.
This problem was sorted by rethinking the relation with the dealers by asking dealers to order daily instead of ordering large batches weekly. Daily mean just the amount sold to the customer that day.
The dealers of Toyota did object to this, they did agree only if Toyota was willing to pay the freight charges if the trucks. For Toyota this costs could be offset by a simplification picking process.
By applying all these concepts with in the parts distribution centre, they managed to convert it into a lean organisation applying lean principles. With these principles we can see the full magnitude of what is happening by ‘pulling’ together all the processes in the value stream. When this system is in place, we see how a customer who approaches Sloane for a bumper can create a pull sequence where this sequence goes all the way back upstream. This is illustrated in the form of a diagram shown below: (Please turn over)
50
Lean Thinking VS Muda Figure 2.9: Toyota PDC after Lean Thinking…
Source: Lean Thinking- Banish Waste and Create wealth in your Organisation By Womack and Jones, (2003) Till now we see how precisely we need to specify value and then identity the value stream for specific products, then introduce a system of flow after which let the customer pull value from its source. However most of the essence of lean is lost if the final principle; perfection is not applied. (Womack et al., 2003)
2.5.5 Perfection
‘The lean enterprise should not pursue competitors, but perfection’
Although there is no perfect definition for the concept of Perfection in lean thinking, it can be summarised into the following: (Womack et al., 2003) Eliminating wasted steps and defects Speeding flow Reducing inventories and volatility Cutting management time 51
Lean Thinking VS Muda
Lean thinking becomes complete only with the final approach of perfection. It is about continuous improvement in the systems of value stream, flow and pull. When explaining the concept of lean, it explains about eliminating waste and continuous improvement in the system. Now eliminating waste is done by the first four principles and continuous improvement is by perfection of the system which again is related to the first four principles because it involves the reduction of Muda.
Perfecting the system Kaizen is a Japanese approach which has been and is being adapted by many companies as a means of survival in an increasingly competitive world. The Kaizen approach concentrates on continuous minor changes which are to improve the efficiency of the organization as well as eliminating wastes. It is believed that through these minor changes significant outcomes will be evident. The Kaizen philosophy led to the development of the Kaizen Events, which are based on the approach of investing minimum and achieving significant outcomes. The level of success is highly dependant on the level of collaboration between the management and the worker. The level of commitment should be high on both sides. It is vital to overcome organizational sluggishness; eliminating cultural barriers to change and make it clear that the transformation must be enterprise wide. Everyone must be committed to change. (Lee et al., 2000)
According to Womack and Jones, there are two approaches to pursue perfection.
-
the incremental path
-
the radical path
The incremental path involved the lean enterprise improving performance gradually from time to time. This is continuous improvement through time where the there is a continuous opportunity for the reduction of Muda. The alternative, which is the radical path to perfection, a total value stream Kaikaku involving all the firms from start to finish across the supply chain converting them
52
Lean Thinking VS Muda into a lean enterprise where the all the firms work under the same principle. So that perfection can be pursued by all firms across the supply chain In fact, all enterprises need both the approaches and at least a combination of both to pursue perfection. But what is more important is that if a company is spending significant capitals to improve a specific activity, they are pursuing perfection in the wrong way. Perfection can be pursued only by taking the entire value stream activities as a whole and putting the right mechanism in place.
Two important lean techniques which are needed.
Value manager need to apply the first four principles as it is important to gauge the gap from current reality to perfection. Then they need to decide which forms of Muda to attack first, by mean of policy deployment. Policy deployment will be discussed in detail in the chapter Techniques of Lean thinking.
Also companies can pursue perfection in the following way: Perfection - Kaizen Blitz or Accelerated Improvement Workshops: This technique of accelerating improvements in the workplace over the course of several days to a week through a series of such events has become an increasingly popular tool both in manufacturing and in service industries. Perfection - Lean Masters: Lean Masters are individual contributors from various disciplines who are process focused, results driven, and implementation oriented. Their role is to develop and lead improvement initiatives within either their own company or in those of their suppliers. Perfection - Continuous Improvement with Suppliers: Some key practices that can be used to work collaboratively with suppliers to try to achieve perfection in the extended enterprise are collaborative value engineering, supplier councils, supplier associations, and value stream mapping between customers and suppliers.
53
Lean Thinking VS Muda Given below is a table showing continuous improvement in the company FNGP of Plymouth, Michigan. Table 2.2: Continuous Improvement of FNGP
FEB
APR
MAY
NOV
JAN
JAN
AUG
1992
1992
1992
1992
1993
1994
1995
21
18
15
12
6
3
3
55
86
112
140
225
450
600
2300
2000
1850
1200
1200
Number of Associates Pieces made per associate Space utilised
1662
1360
Source: Lean Thinking- Banish Waste and Create wealth in your Organisation By Womack and Jones, (2003)
Joe day the president says that no matter how many times his employees improved a given activity to make it leaner; they always found more ways to remove Muda by eliminating effort, time, space and errors. (Womack et al., 2003) Paradoxically, no picture of perfection can be perfect. Perfection is like infinity. Trying to envision it is actually impossible, but the effort to do so provides inspirations and directions essential to making progress along the path. So it’s very important to make the practice of perfection by continuous improvement successful.
2.6 Summary The second chapter discusses in detail the five main principles of lean along with examples. Value, value stream, flow, pull and perfection are the backbone of the lean thinking principle. From the examples, the different kinds of Muda were identified with in the process. This chapter focuses on value creation from a customer point of view by the elimination of MUDA. Any lame person need to first understand these principles to get deeper into the concepts of lean thinking.
54
Lean Thinking in Supply Chain
CHAPTER THREE
LEAN THINKING IN SUPPLY CHAIN
3.1 Introduction A car takes only around 20 hours to assemble and may be another couple of days to ship it to the customer via the dealer. But in reality why does a car take more than a month or two to reach its customer? Also, why are products not there on the shelf of the super market when it’s wanted by a customer? These questions go right into the heart of supply chain and supply chain management. Today, a massive amount of the company funds are being invested into their supply chain to make it more effective and efficient, why? Because supply chains are slow, costly and do not deliver the product and good value to the end customer. (Harrison et al., 2005)
We should realise that a supply chain exist for every industry, every company and every product or service even if it is just a once off or a repetitious activity. This shows how important the supply chains are to the success of the industry, company, product or service. The activities in the supply chain are motivated by the ideal end customer and it is facilitated by the latest technologies and communications which permit the flow of material and information upstream and downstream. However in different industries there are different complexities that arise in the supply chain. Before we go any further, it is important to define the difference between the terms ‘supply chain’ and ‘supply chain management’. A Supply chain is a group of partners who collectively convert a basic commodity (upstream) into a finished product (downstream) that is valued by the end customer, and who manages returns at each stage, (Harrison el al., 2005). Every partner in the supply chain is responsible directly for a process that adds value to a product. Under the supply chain, it is very important to understand the term ‘process’. A process is transforming inputs in the form of material and information into outputs in the form of goods and services. Supply chain management involves planning and controlling all the process that link the partners in a supply chain together in order to serve needs to the end customer. (Harrison el al., 2005) 55
Lean Thinking in Supply Chain
Serving the needs of the end customer is the primary objective of the supply chain but it has different context. In a non profit organisation, serving implies continuously improving, better than other regions/ countries and in a commercial sector, serving implies better than competitors, better value form money and so on. In both ways, the focus of managing the supply chains as a whole is on integrating the process of supply chain partners, of which the end customer is the key one. As Gattorna (1998), puts it. The degree to which the end customer is satisfied with the finished product depends on the management of the material and information across the supply chain. The globalisation of supply chain has forced companies to look for more effective ways to coordinate the flow of material into and out of the company. (Mentzer, 2001)
What are required are better managerial techniques to manage the supply chain. Though the concept of lean is rooted in the manufacturing industry, the principle of lean thinking is universal and can be applied successfully in a wide range of industries- not just in traditional production environment but also in service industries, software development, construction, complete supply chain.
This principle as
mentioned in chapter two focuses on improving value to the customer by eliminating waste. But the lean supply chain concept is built on a broader goal of providing value to the customer by optimising the performance of the supply chain as a system. With this, the supply chain can be made effective and efficient enhancing better results and growth to the industry, company, product or service.
3.2 Overview of the concept: Supply chain Management A well-managed supply chain offers a range of benefits, from simplification and risk reduction to significant cost savings. Traditional forms of procurement have relied on choosing from among a large number of suppliers, with the aim of maintaining supplier competition and driving down costs. Supply-chain management takes a radical approach to procurement, with the aim of setting up long-term relationships with suppliers, so that leaner, value-adding and more efficient ways of working can be developed. Suppliers are encouraged to adopt similar “managed” relationships with their suppliers, and so on—ideally—down the tiers of supply. The practice of supply-chain 56
Lean Thinking in Supply Chain management (SCM) was pioneered by Toyota in Japan, driven by the demand for faster times to market, quicker fulfilment of orders and lower costs. It was enabled by the rapid development of IT and globalization. For supply chain management, workers with in the Supply chain must strive to stay on top of new technology and develop knowledge on how they can improve not only their company but their partners too (Muzumdar et al., 2001). Other manufacturing industries adopted the same route. By then SCM had spread to the oil and gas industries, where collaborative relationships were fostered during continuing programmes. SCM in these sectors, often in the form of partnerships and alliances, blazed a trail for the wider construction and engineering industries. (Johnson et al. 1999)
Factors favouring the adoption of SCM (MPA, 2002)
SCM flourishes in particular circumstances: Where the balance of power lies with the buyer Where business activity involves repeat processes—in practice this favours manufacturing (with its high-volume, standardized demand). In a collectivist culture like Japan—an opportunist culture works against successful SCM.
SCM in a steady-state environment As its origins and evolution suggest, SCM works:
Where demand and supply can be successfully aligned in a long term context Where numerous assemblies (as in aerospace), each with its own supply chain, offer opportunities to eliminate waste
57
Lean Thinking in Supply Chain SCM in a project environment Major projects are not an ideal environment, but SCM can work in certain circumstances:
In continuing construction programmes, where construction clients (like BP’s petrol stations forecourts and McDonald’s restaurants), can, as “serial procurers”, develop SCM practices with their suppliers By any contractor who uses the same suppliers but has not yet standardized supplier relationships Through mechanisms such as partnerships, alliances and incentives contracting.
3.3 Structuring and Tiering As mentioned on top, supply chain management is about managing the business relationship with the various partners and reducing complexity of the supply chain. This approach described here goes well beyond the limited concept of just supply chain management and would be better describes as ‘supply chain development’. (Harrison et al., 2005)
Given below is the structure of a supply chain: (Please turn over)
58
Lean Thinking in Supply Chain Figure 3.1: Conceptual Framework of a Supply Chain…
Source: Developing Lean supply chain- A guide book by Phelps et al., (2003)
The various shapes in the diagram show the different partners in the supply chain. Let’s consider them to be supplier companies, which would deliver different class of product such as complex assemblies, machine parts, metals, plastic parts, painting, and various other raw materials. The above diagram is the supply chain show in simplification. (Phelps et al., 2003) When taken real supply chains in Toto, are not really chains but very complex networks with all tier violating connections between them, as show in the diagram below
59
Lean Thinking in Supply Chain
Figure 3.2: Complex supply chain network…
Source: Developing Lean supply chain- A guide book by Phelps et al., (2003)
If we take the structure of the supply chain, most people think that they are triangular in shape, one or few customers at the top and the lower tier suppliers containing more suppliers one above it. This is true when taking only the first and the second tier. But, as the chain reaches down to the raw material suppliers, the number of suppliers tend to reduce dramatically. Thus when looking at the supply chain now, it will be shaped more like a diamond i.e. narrow at the top and bottom and wide in the middle. This put forwards an interesting point when working with a supply chain; it shows the limited influence of the customer may have in the raw material suppliers. It is not necessary that a supply chain must start with the end customer at the top neither it needs to be a prime contractor at the top of the supply chain. Sometimes the top level of the supply chain can be a supplier of the major gas turbine engine or aircraft engine. It is up to us to decide where the end points should be based on a
60
Lean Thinking in Supply Chain specific situation. To show an example of how it works the prime contractor will be selected at the top of the supply chain. (Phelps et al., 2003) Given below is the diagram to show Tiering and the supply chain systems.
Figure 3.3: Supply chain System + tiering…
Source: Harrison, A. et al. (2005), Logistics Management and Strategy, 2nd edition, Pearson Education Ltd, England
Generally for commercial products, the left most box of the diagram will be an original equipment manufacturer (OEM), it can also be a first tier supplier working with its own supply chains. But what is important in the diagram is that the supply chain needs to be seen as a number of processes that extend across the organisational boundaries. The different firms must coordinate with others that are part of the same chain. We also notice the flow of material from right to left and the flow of information from left to right. The supply chain is tiered in that supply side and demand side can be organised into groups of organisations. (Phelps et al., 2003)
61
Lean Thinking in Supply Chain Also the concept of addressing it as a system is appropriate in any of these cases, especially since business processes are as much a part of the system as the manufacturing process. Thus this gives the opportunity to consider the supply chain as a process similar to that of the manufacturing process which will enable the applications of lean to be introduced into the system.
3.4 Characteristics that Make Supply Chain different According to Phelps et al. (2003) there are two primary things which make working in a supply chain different from other individual companies.
The first is obvious and it is greater complexity. This is simply because there is much more to consider when looking at several companies at once rather than just one of them. Analysts are of the impression that they can carry out the whole analysis at a high level to find the supply chain issues. But that turns out not to be the case. They have to look at all the companies at the same level of detail which they use when looking at them individually. Therefore there are far more process steps to look into than within an individual company. The complexity involved in a single process of a supply chain is itself so numerous. Fortunately the detailed work is done in single company chunks. Still, the need of information from the prime contractor or the end customer and the respective tier suppliers are significant resources which are required by the analyst.
The second major difference is the independence of the companies in the supply chain. Every firm in the supply chain or as mentioned previously in the, the partners of the supply chain operate under their own management and are independent profit and loss centres. Whether a customer or a supplier; there is no visibility into its trading partner’s activities. Thought the customer or supplier meets on a regular basis, they do not look at each others business. Contracts between the firms in the supply chain are generally between the purchase and sales agents of the respective companies, neither of it involve the top personnel’s of the company. Due to lack of visibility by all the partners of the supply chain, each firm’s goal is maximise its own profit and protect its special interest both of which encourage building a wall among
62
Lean Thinking in Supply Chain each other rather than cooperation. For those companies in a supply chain that are not direct trading partners, there is rarely any contact between them at all.
Another complication when related to the independence of companies is that the relationships between the firms are not exclusive. That is, each firm has different customers and suppliers apart form the once in a particular supply chain. So the influence exercise by a firm on another is very important in the supply chain.
Also the inter firm supply relationship exhibit different natures on contrasting products with in one sector. This increases the complexity in the supply chain analysis. (Lamming, 1996)
These are the two characteristics which make the supply chain different from the other industries. 3.5 Supply chain performance According to Phelps et al. (2003) the primary goal of the Supply chain value stream management (SCVSM) is to optimise the supply chain performance as a whole. As mentioned earlier the supply chain focuses on the smooth system of converting raw materials into final products. Now the supply chain can be optimised with the help of intelligent application of the lean principles across the supply chain. The ideal lean effort can be seen only when applied practically which is primarily involved in waste reduction.
In general, anything which is classified as waste within a company will also be waste from the supply chain point of view. A classic example is work in progress (WIP); partially completed work sitting around waiting for its next processing step. WIP is waste when you look at it from a single company or a supply chain point of view. However from a supply chain view finished goods and inventories at suppliers is really WIP. Hence it is important for the suppliers in the supply chain work together to improve their scheduling, shipping and processes, allowing them to hold only the amount of strategically located inventory necessary to
63
guard
against
flow
Lean Thinking in Supply Chain interruptions. This may seem obvious, but because it requires coordinated effort across different companies. It is very difficult to achieve it. Some kinds of waste are visible and can be addressed only when the different companies work together with in a supply chain. Work being done in one company then again redone in the other company is a very good example. Some of the other examples are redundant systems, incomplete information, duplicate inspections and approvals and minimum quantity transportation.
The supply chain performance can be calculated using two different measures: -
Cost
-
A combination of cost and customer responsiveness
The cost will include the inventory cost and the operating cost. The customer responsiveness measures include lead times, stock out probability and fill rate. (Beamon, 1999)
In fact, building lean supply chain, like building lean thinking in companies, is conceptually largely driven by common sense, one people change they way they look at their work and their trading partners. The difficulty off course is in getting people to get the mental change to work towards common goal instead of individual and sometimes conflicting, goals. Although a difficulty, it has been done. Therefore building a lean supply chain will help the suppliers with their other customers, if they adopt the internal changes as required by the lean thinking company.
3.6 The Unique Misconception of People Phelps et al. (2003) believe there are plenty of cases documented which prove huge profitability companies have earned by adopting the lean concept. Unfortunately, people of a company are generally of a notion that their companies’ policies and techniques are the best and do not need any change. They believe that the methods in which success is earned by the other companies will not apply to them. In reality, it is completely opposite. Regardless of what people in a different company think, companies of the same general type differ very little from one another in the kinds of 64
Lean Thinking in Supply Chain problem they have and the solution to those problems. So this misconception of what companies are doing is right should be erased if the concept of lean need to applied into supply chain. This change can take place not only at the top level but it should be take place in the entire company.
Why Be Lean?
As more and more companies adopt a “horizontally integrated” business model, they are seeking to perform only their core functions, while outsourcing the non core activities. It also means sourcing from another part of the globe and relying on thirdparty providers for the necessary logistics support. This contrasts sharply with the oldworld “vertically integrated” approach in which everything from basic raw materials to end customer sales might be under the control of a single global enterprise. (Vitasek et al., 2005) This move toward horizontal integration has made the supply chain more complex. And with this heightened complexity comes a new set of challenges such as: (Please turn over)
How do you manage a global supply chain while retaining speed and flexibility? How can you eliminate waste across the supply chain—not just at one point in the channel? How can firms collaborate in a way that is mutually rewarding? How do you meet the needs of a global customer without excessive work in process or inventories? And, most importantly, How do you accomplish all of this in the face of shrinking margins? Some industry leaders and experts are finding the answers in a business approach with roots deep in manufacturing: lean. Specifically, they are applying the lean production principles to the management of their global supply chains.
65
Lean Thinking in Supply Chain 3.7 The Lean Supply Chain
As the authorities point out; the objectives of lean are to eliminate waste in both materials and processes and to create value. Importantly, value is defined from the perspective of the customer. If an activity or process does not add customer value, then it is considered waste. While individual firms can become lean by themselves, a lean supply chain requires multiple entities to work together. It’s important to understand up front that lean supply chain management is not an exercise in shifting inventories or costs to a supplier. Instead, it’s a coordinated effort among partners to eliminate waste across the supply chain. This can only be done by collaborating across common processes. (Phelps et al., 2003; Vitasek et al., 2005) 3.8 Why Lean?
Why work to develop the lean supply chain attributes in the first place? To help answer these questions, we shall consider the results of the survey conducted by Kate Vitasek, Karl B. Manrodt, and Jeff Abbott. The most striking comparisons of the survey were done between the adopters and the non adopters of the concept of lean in their supply chain. •
Lean adopters see exchange of data as a tactical advantage and are more likely to work with partners on data standards to enhance information integration (40 percent vs. 11 percent of non adopters).
•
Lean adopters see employees as a valued asset and emphasize employee development (77 percent). Non adopters are less likely (47 percent) to provide support for development programs and, in general, view employees as more expendable.
•
Lean adopters are more likely to have continuous improvement programs (80 percent). Of the non adopters, 43 percent indicated that they have no such programs.
66
Lean Thinking in Supply Chain •
Lean adopters are more likely to collaborate with supply chain partners on process standards. Non adopters are significantly less likely to do so.
•
Lean adopters are more likely to enforce company product standards (63 percent). Fully half of the non adopters indicated weak enforcement of company standards or had no standards at all.
•
Lean adopters participate in standards bodies and work with partners on standards (48 percent). Non adopters were less likely to do so; 34 percent either use no industry standards or attempt to enforce their own standards on the group.
•
Three-fourths of the non adopters either don’t share data with key partners because they consider it to be proprietary or, if they do make data available, offer no conversion assistance.
The research also revealed sharp differences in how the two groups performed on the key logistics metrics of inventory turns and the number of days of sales in inventory. As shown in Exhibit 1, lean adopters had statistically significantly higher inventory turns as well as lower days’ sales in inventory on hand. And because the leaders are not carrying excessive levels of inventory, their cost of goods sold is lower and they are better able to respond to changes in the supply chain. In short, they are enjoying two of the key benefits of lean supply chain management. Given below is the diagrammatic representation of the benefits. (Please turn over)
67
Lean Thinking in Supply Chain Figure 3.4: Benefits of Lean Supply Chain…
Source: Vitasek, K et al. (2005), “What makes a lean supply chain”, Supply chain management review
Research suggests that the lean adopters communicate and collaborate more successfully with their supply chain partners. They have a higher use of standards in processes and materials. The lean adopters also enjoy reduced Stock Keeping Unit (SKU) counts and inventory levels and report a general reduction in cost of goods sold when compared to the non adopters. Notably, all of these factors contribute to the bottom line. (Vitasek et al., 2005)
3.9 Lean Supply Chain Process When applying the concept of lean thinking into the ‘supply chain’, it is very important to understand the functions and practices of the companies involved in the supply chain to which lean techniques are going to be applied. As mentioned earlier, companies need to realise why they are changing. For them to sustain the benefits of lean, it needs to be addressed, understood and communicated to create and environment of change transformation. They need to look beyond the current crisis
68
Lean Thinking in Supply Chain and see whether such a transformation can handle the future challenges the companies supply chain might encounter. (Phelps et al., 2003) The fame work to develop a lean supply chain should be defined through a series of measurable performance goals that are identified in the value stream and at each level and for each participant in the chain. According to Phelps et al. (2003) the Process to develop a ‘lean supply chain’
Select the target supply chain a. Identify the system/ product and associated performance goals that create the highest level context for optimization. b. Determine a list of likely first- tier candidates. c. Select the first- tier supplier and target assembly. d. Define the performance goal that creates the specific context for optimising the performance of the selected supply chains. e. Map the rest of the supply chain. f. Select the set of sub- tier suppliers that afford the greatest opportunity to achieve the performance goals.
Assess the current state of the supply chain a. Assess the first- tier suppliers, including performance baselines. b. Assess the prime contractor, including performance baselines. c. Bring the supply chain companies together to explain the process and gain buy- in from sub- tier suppliers. d. Train the sub- tier suppliers. e. Assess the sub- tier suppliers, including performance baselines. f. Develop the macro view of the supply chain.
69
Lean Thinking in Supply Chain
The explanation of the process here is the principles
of lean
thinking which begins by specifying value as that of the customer, then identifying the value stream, after which creating smooth flow between the systems which is created by the customers’ pull. The principle of
perfection
can
be
achieved
with
continuous
improvement. These principles are explained in detail in Chapter 2. Determine how best to move forward a. Draft the future state. b. Develop a list of opportunities for improvement. c. Evaluate opportunities in relation to performance goals. d. Bring supply chain together to present assembler results and determine what improvement projects must be done.
Implement change a. Plan the improvement project. b. Execute the project. c. Measure and document improvement; compare to performance goals d. Bring supply chain companies together to celebrate success, present improvement result and define road map for continuing work.
Share result with current and potential customers as well as other suppliers in the same and other supply chains It is noticeable that for the successful development of a lean supply chain process, it is very important that all the firms that belong to the supply chain work together to make the supply chain lean. (Phelps et al., 2003)
70
Lean Thinking in Supply Chain 3.10 Lean Practices The main aim of the lean supply chain is to collaborate strategically with the suppliers so that new products can be developed and manufactured without delay. It helps in coordinating the components and subassemblies on time and without delays. According to the Lean strategies group LLC to achieve lean in the supply chain, given below are some of the practices that a company should adopt, so that lean thinking is promoted into the supply chain. From these practices we can see how a lean company differs from a traditional company and the benefit the lean company get by adopting the concept of lean thinking into its supply chain.
--Reduce the Supply Base Lean companies
The main aim is to reduce the number of suppliers for each commodity of purchases to a minimum and often only one
Traditional companies
They deal with many suppliers, that it is not possible to fully understand the capabilities of any one of them (quality, capacity, cost structure, or technical capabilities)
Divide the volume among many suppliers to the extent that their company's purchasing bargaining power and influence is low at all of them
Focus primarily on price in making buying decisions
Benefits of Lean
The development speed and the fulfilment of operations increases because of fewer and more dependable suppliers making fewer mistakes and causing lesser disruptions
It enables companies to spend more time with supplier to maintain a close strategic relationship.
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Lean Thinking in Supply Chain
Makes you a major customer of your important suppliers which allows you to influence quality, price, delivery schedules, and capacity decisions
--Develop Strategic Long term Partners Lean companies
Develop supplier partners, especially in the commodities key to their company's growth and future success
For a successful relationship and open corporate culture ensure that there is a close match in technology and growth plans.
Plan and execute for a long-term relationship where the outcome will benefit both the companies in the long run.
Exchange much more data than traditional relationships
Traditional companies
They have short term relations and change to another supplier at the first disagreement on price or delivery.
Do not discuss strategic issues like technology roadmaps, capacity planning, plant locations, major quality initiatives, redesigning for cost reduction.
Do not try to understand the motivations and aspirations of the supplier nor its needs to make a profit to grow and continue as a viable supplier.
Benefits of Lean
Discussion at all levels which permits either party to understand the technical, cost, and quality issues of the product.
Allows discussion of growth and capacity planning.
Allows discussion of quality and reliability improvement plans and exchange of very detailed product failure data.
Allows technology discussions detailed enough to produce a better solution for both companies.
72
Lean Thinking in Supply Chain --Manage Suppliers with Commodity Teams Lean companies
The strategic issues with key suppliers are very important to several functional areas for lean companies.
Realize that total cost is more important than the price in making purchasing decisions.
Use a commodity team to make strategic decisions concerning suppliers.
Staff this team with members from the differential functional areas, which might be purchasing, engineering, manufacturing, and quality.
Traditional companies
Allow purchasing department to make all strategic decisions regarding suppliers.
Make purchasing decisions almost entirely on price and no cost.
Benefits of Lean
Provides a forum for engineering, manufacturing, quality and reliability, etc. to influence the criteria for selecting and managing strategic suppliers
Directs the work of quantifying the intangible costs of a commodity to be used with the pricing in making strategic decisions
--Certify Suppliers Lean companies
Use cross-functional teams to certify suppliers.
A certification process is used to challenges suppliers and makes them proud to be certified
Ensure that the certification process contains exactly those criteria that are important to the company.
Recognize certified suppliers publicly so that suppliers get noticed.
73
Lean Thinking in Supply Chain Traditional companies
Do not certify or use any system of that sort.
Even if certification process is followed, the companies have too many suppliers to do certifications or do them properly.
Benefits of Lean
Lets the supplier know your standards.
It makes the supplier proud.
It makes the supplier strive to achieve company standards.
Produces better suppliers, cutting mistakes and confusion to create leaner operations.
--Connect to Suppliers with Internet technologies Lean companies
Use Internet technology to connect to their suppliers.
Find that the Internet technology makes it much easier to establish and follow consistent business processes with suppliers.
Exchange not only transaction data, but also a wide variety of other information.
Can easily get information immediately to everyone involved in both companies.
Publish technology roadmaps, capacity planning, engineering data, and quality programs.
Traditional companies
Have communication difficulties caused by foreign languages and distant time zones.
Have difficulty telling the supplier where to find the official source and location of important pieces of information regarding schedules, quality deviations, engineering changes, etc.
Waste immense amounts of time and manpower exchanging information. 74
Lean Thinking in Supply Chain Benefits of Lean
Reduces confusion, making your company leaner.
Provides an official place for publishing many types of information and data.
Reduces headcount at both companies.
Brings your key suppliers closer, improving the partnership.
Gives engineering, manufacturing, and quality & reliability people instant access to information formerly filtered through purchasing.
3.11 Attributes of a Lean Supply Chain According to Vitasek et al. (2005) there are six attributes that have been identified which companies should strive to develop in order to apply the lean supply chain concept. Demand Management Capability A significant rule to of the lean philosophy is that the product should not be pushed to the market and should be pulled by the actual customer. Ideally, point-of-sale (POS) data is gathered in real-time, or near real- time (daily), and transmitted upstream to all the supply chain members. This doesn’t mean just the tier one suppliers but all the suppliers as well who are involved in the supply chain. Thus, suppliers at each level of the process would receive the customer’s demand signal and convert it into something usable (such as part number and quantity) for their upstream partners. In this way, we can understand the total volume being sold. Through time, forecasting the need should minimize, since the supply chain is responding to actual demand. The consequences of not managing the demand signal have been well documented. The biggest problem is often referred to as the “bullwhip effect,” whereby additional units are added to the original demand signal as it moves further upstream, which result in excessive inventory being held by all of the channel partners, which makes it much difficult to respond effectively to change. (Leishman et al., 2005)
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Lean Thinking in Supply Chain Waste and Cost Reduction The next important aspect to be a lean supply chain is by focusing on the ground rule of elimination of waste which is the prime focus of lean thinking. In the broadest sense, waste can be taken as time, inventory, process redundancy, or even digital waste. Digital waste is especially detrimental to the supply chain. It refers to redundant or unnecessary data that is collected, managed, and stored for no tactical or strategic reason. The amount of digital waste within an organization is typically great. Note that the emphasis here is on reducing waste, and not cost. There’s not always a direct correlation between eliminating waste and cutting costs. Yet waste reduction almost always results in lower costs. A focus on waste, and not cost, will imply a motive of lean thinking between the suppliers and customers. If the goal is to reduce waste, most parties are more willing to discuss their processes with one another. With a joint goal of reducing waste, supply chain partners can work together to modify those policies, procedures, and data-collection practices that produce or encourage waste.
Process and Product Standardization Process and product standardization is the third attribute of a lean supply chain. It’s important to develop standardization across both processes and products for the reasons elaborated below. ♦
Process standardization enables continuous flow—that is, the uninterrupted movement of a product or service through the company’s system and to the customer. Major inhibitors of flow include work in queue, batch processing, and transportation issues. These roadblocks slow the time from product or service initiation to delivery.
♦
Continuous flow needs to be accomplished with a “value stream” perspective, which means viewing processes in terms of how they add value to the customer. This perspective demands a shift from vertical to horizontal thinking.
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Lean Thinking in Supply Chain ♦
This effort is facilitated by having processes that are standardized across the supply chain to reduce complexity. In other words, the organization first determines the best way to manage a process and then standardizes this process across the organization, taking into account regional or cultural differences.
There should be common communication platform for interconnection between the partners for achieving process and product standardization (Cassivi et al., 2000). Companies can benefit from standardizing products used in the manufacture or assembly of goods. In this way, fewer unique components are needed, thereby reducing manufacturing, warehousing, and development costs.
Industry Standards Adoption Standardization also needs to extend beyond a company’s particular supply chain to the industry overall. Industry product standards benefit the companies by reducing the complexity of product variations. The consumer electronics industry provides a perfect example of effective use of cross-industry standards—from the pin arrangement for various electronic components, to the size of a hard disk drive used in a computer, to the dimensions of the racks for mounting telephone switching equipment. Even the aerospace industry looks from an enterprise perspective so that there are industry standards. Murman et al., 2002) In the supply chain, companies can benefit from standardizing products by sharing subcomponents across product lines. In this way, fewer unique components are needed. Cultural Change Competency There is one recurring obstacle to successfully applying lean supply chain concepts— resistance of change from the people who will be asked to embrace and implement the change. The same people who have been doing things the old way for a long time. Cultural change is one of the biggest challenges in getting lean accepted in the organization. But this can be overcome by the usage of ergonomics and lean thinking 77
Lean Thinking in Supply Chain which will make employees pursue lean. (Wadler et al., 2007) Successful cultural change requires a clear roadmap. During times of change or uncertainty, employees want to know where things are headed. It can clearly communicate the objectives and benefits of going lean. The lean roadmap must have the unconditional support of top management. The company’s view of its people within the organization also is crucial to successful cultural change. Cross-enterprise Collaboration The final attribute of the lean supply chain is cross-enterprise collaboration. The first step is to first understand how the customer defines value. Added services are of true value only if the customers understand and desire them. Cross-enterprise teams are a major enabler of supply chain collaboration. In a lean supply chain, these teams are not functionally oriented or internally focused. Rather, they are oriented toward the whole supply chain and work toward solutions that benefit all of the members. The most effective teams comprise members from all of the end-to-end supply chain partner companies. The team members should represent all of the principal supply chain functions of plan, source, make, and deliver as well as the enabling functions of finance and technology. Proper flow of information and material is detrimental for the supply chain effectiveness. (Franciss, 1999)
Where to start?
In terms of the lean supply chain, all six attributes have to be developed at the same pace and to the same degree. If focus can be on only one lean attribute—and only one improvement—in the supply chain, it should be the demand management capability. Effectively managing the demand signal across your organization and then communicating that signal to the suppliers will reduce waste, cut costs, and ultimately lead to higher supply chain performance. (Vitasek et al., 2005)
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Lean Thinking in Supply Chain 3.12 Components of the Lean Supply Chain According to (Tompkins, 2001), the components of the lean supply chain are: Lean Suppliers The major component of the lean supply chain is the lean suppliers who are able to respond to changes. Their prices are generally lower due to the efficiencies of lean processes, and their quality has improved to the point that incoming inspection at the next link is not needed. Lean suppliers deliver on time and their culture is one of continuous improvement. Lean Procurement The lean procurement processes are e-procurement and automated procurement. Eprocurement conducts transactions, strategic sourcing, bidding, and reverses auctions using Web-based applications. Automated procurement uses software that removes the human element from multiple procurement functions and integrates with financials. The key to lean procurement is visibility. Suppliers must be able to "see" into their customers' operations and customers must be able to "see" into their suppliers' operations. Organizations should map the current value stream, and together create a future value stream in the procurement process. They should create a flow of information while establishing a pull of information and products. Lean Manufacturing Lean manufacturing systems produce what the customer wants, in the quantity the customer wants, when the customer wants it, and with minimum resources. Lean efforts typically start in manufacturing because they free up resources for continuous improvement in other areas, and create a pull on the rest of the organization.
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Lean Thinking in Supply Chain Lean Warehousing Lean warehousing means eliminating non-value added steps and waste in product storage processes. Typical warehousing functions are:
Receiving
Put-away/storing
Replenishment
Picking
Packing
Shipping
Warehousing waste can be found throughout the storage process including:
Defective products which create returns
Overproduction or over shipment of products
Excess inventories which require additional space and reduce warehousing efficiency
Excess motion and handling
Inefficiencies and unnecessary processing steps
Transportation steps and distances
Waiting for parts, materials and information
Information processes
Each step in the warehousing process should be examined critically to see where unnecessary, repetitive, and non-value-added activities might be so that they may be eliminated. Lean Transportation Lean concepts in transportation include:
Core carrier programs
Improved transportation administrative processes and automated functions
Optimized mode selection and pooling orders
Combined multi-stop truckloads 80
Lean Thinking in Supply Chain
Cross docking
Right sizing equipment
Import/export transportation processes
Inbound transportation and backhauls
The keys to accomplishing the concepts above include mapping the value stream, creating flow, reducing waste in processes, eliminating non-value-added activities and using pull processes, this is done so that customer expectations are fully understood and value is delivered to the customer. (Taylor et al., 2006) Lean Customer Lean customers understand their business needs and therefore can specify meaningful requirements. They value speed and flexibility and expect high levels of delivery performance and quality. Lean customers are interested in establishing effective partnerships—they are always seeking methods of continuous improvement in the total supply chain to reduce costs. Lean customers expect value from the products they purchase and provide value to the consumers who they interact with. So when look at the various components of the lean supply chain given above. Each of them in their own way have applied the principle of lean which are value, value stream, flow, pull and perfection. From this we can draw a conclusion that for an efficient lean system, its not just one firm which needs to be applying lean but all the firms across the supply chain.
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Lean Thinking in Supply Chain 3.13 --7 deadly Supply chain wastes In the production system, Toyota calls it ‘Muda’ and in English it is called ‘Waste’. Given below are the seven most deadly wastes in terms of the supply chain which have been identified by the lean thinking principle. (Sutherland et al., 2008)
The seven supply chain sins – the waste that keeps the supply chain for attaining full business potential are:
Figure 3.5: Seven Wastes of Lean Thinking…
Source: Vitasek, K et al. (2005), “What makes a lean supply chain”, Supply chain management review
Over production: Built first, wait for orders later. An example to this is delivering products which are not needed. What is more serious is demand information overproduction which Toyota calls ‘created demand’. Created demand is caused by requesting a quantity greater than needed for end use or requesting it earlier than needed. Created demand typically adds 40 percent to supply chain volume which makes the supply chain less efficient. For example, Toyota had identified and eliminated created demand to slash its inventory. Initially the company and the automotive industry as a whole started using 82
Lean Thinking in Supply Chain weekly stock replenishment orders which then combined with traditional sales policies to caused large volume fluctuations. To fix the problem, Toyota transitioned to daily stock order replenishment. Using a “sell one, buy one” method, Toyota scheduled separate order cutoff times by delivery route. Immediately after the cutoff time, orders were processed, picked, packed and shipped. With daily stock order replenishment and Toyota's industry-leading fill rate, 4 critical orders dropped to 1-3 percent of volume from over 30 percent. With this there was better flow created and smooth flow of information and material across the supply chain. The lack of waste caused the better flow in the value stream of the supply chain. (Agel et al., 2004)
Delay/Waiting: This will include delay between the end of one activity and the start of the next activity, such as the time between the arrival of a truck for a pick-up and the loading of the trailer, and the delay between receiving the customer's order information and beginning to work on fulfilling the order. Such gap between two activities is Muda. Because of the separation of most of the activities each of these functions is often unaware of the schedule for the subsequent process and this result in the operation of cut off times. For example, FedEx and UPS have cutoff time at the end of the workday so that shipments can clear their hubs and be loaded on night flights to destination hubs; railroads have cutoff times for railcars to reach their switching yards for train makeup; ocean carriers have cutoff times for containers to arrive at their terminals to be loaded on specific vessels.
Transportation/Conveyance: It is any kind of unnecessary transport. Out-of-route stops, excessive backhaul, locating fast-moving inventory to the back of the warehouse and other transport wastes cause unnecessary material handling distances to be incurred. Transplace, a North American third party logistics service provider (3PL), also managed to solve a transportation problem it faced. Initially the company managed dozens of major shippers' transportation needs independent of each other. The network followed by the 3PL had wasted routes of the shippers’ networks. Working collaboratively they systematically combined multiple shipper networks into a single
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Lean Thinking in Supply Chain network and identified regular backhaul lanes for one shipper that were regular head haul lanes for another shipper. Then, by negotiating “dedicated” lane agreements with select truckload carriers, they were able to offer dedicated services within specific lanes that dramatically reduced deadhead miles. This also provided a reduction in transportation costs and, due to more dependable service reliability, overall inventory reductions. (Sutherland et al., 2008)
Motion: It includes any kind of unnecessary movement made by people, such as walking, reaching and stretching. Motion waste also includes extra travel or reaching due to poor storage arrangement or poor ergonomic design of packaging work areas. Storage arrangement can influence the labour productivity and space/ equipment utilization in a significant way. Toyota's U.S. service parts warehouse network and inventory control system were originally set up in the 1960s and managed in the traditional fashion (Womack et al., 2000). Rapid sales growth put a lot of strain on the facilities. By the 1980’s, Toyota had successfully implemented the TPS to their service parts distribution operations. Lean Storage --designing storage locations precisely sized to the parts to be stored in each location and locating parts based on frequency of demand and picking/stock keeping efficiency. Small Batch Processing --applying the concepts of Standardized Work to warehouse operations. Kaizen --engaging employees in continuous improvement. During a 13-year period when sales grew by 126 percent and stocked part numbers grew 72 percent, warehouse space was increased by only 14 percent, thereby reducing capital investment.
Inventory: Any logistics activity which results in more inventories being positioned than what is actually needed or in a location other than where it is needed. Examples include early deliveries, receipt of order for a quantity greater than needed, and inventory in the wrong distribution center 84
Lean Thinking in Supply Chain “Sell One, Buy One, Make One” is the cornerstone of Toyota's industry-leading JustIn-Time Logistics supply chain performance. Inventory and operational efficiency is achieved through a constant focus on reducing lead time and variation in demand and lead time. All dealers order daily what they have sold daily. Heijunka (leveling volume and variety) is applied to the operations of the entire supply chain, with excellent synchronization among supply chain partners. More than 80 percent of the volume is ordered daily from suppliers and shipped daily 96 percent on time in standard lead time.
Space: Muda is when the use of space that is less than optimal, such as less than full/optimal trailer loads, cartons that are not filled to capacity, inefficient use of warehouse space, and even loads in excess of capacity. Due to the rapid congestion in Toyota’s North American parts centre, a proposal of capital investment to construct additional docks was submitted. But -
Practicing genchi genbutsu, the company discovered that there was some unused space in many outgoing trucks (estimated at 6 percent additional capacity).
-
A kaizen activity involving the loaders effectively utilized this additional space, eliminating the need for additional dock doors and cutting transportation costs by 6 percent.
-
Further genchi genbutsu revealed the cartons used by some North American suppliers had more empty space than like parts previously sourced from Japanese suppliers.
-
Kaizen activities by the responsible personnel further improved the density of shipments allowing more sales and saving ten percent in transportation cost. (Womack et al., 2000)
Errors: Those activities that cause rework, unnecessary adjustments or returns, such billing errors, inventory discrepancies, and adjustments and damage/ defective/ wrong/
mislabeled
product
are
all
errors
or
so
called
Muda.
In Toyota's service parts packaging operations, mislabeled cartons were the number one cause of errors. In a kaizen, Toyota implemented a very inexpensive and effective countermeasure. For example, a packer had five cartons of a part number to pack; he/she was given 85
Lean Thinking in Supply Chain seven labels. The first label was stuck on a form with a row of circles below the label for each digit in the part number. The packer would write the part number from the parts to be packed in the circles and compare it with the part number on the label. After packing the five cartons, the packer repeated the process with the 7th label and last part. Labeling errors dropped dramatically. (Womack et al., 2000)
3.14 Benefits of Lean Systems in Supply chain According to Tompkins (2001), the Benefits of the lean supply chain are: Speed and Responsiveness to Customers The lean supply chain makes the system mot only efficient, but faster. As the culture of lean occupies the company, all links increase in speed. A culture of rapid response and faster decisions becomes the expectation and the norm. This does not mean that decisions are made without careful thought. It simply means that a "bias for better responsive action" becomes the new corporate culture. Slow response or no response becomes the exception, rather than the rule. Reduced Inventories In the lean paradigm, any sort of inventory is considered waste. The point is that even manufacturing can take place efficiently with little or no raw material, work in process (WIP), or finished goods inventory. Many companies today maintain no finished goods inventory. The inspections are performed in advance during the process and not once the production is complete. And in such a scenario, as soon as the trailer is full, it is shipped to the next link in the supply chain. The system is designed in such a manner not to tolerate and excessive goods. Applying one-piece flow and pull systems can reduce WIP dramatically. Although the ultimate goal is to eliminate WIP, minimal WIP is normally the result. The elimination of bottlenecks is one goal of a lean supply chain, but a bottleneck will
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Lean Thinking in Supply Chain always exist to some degree. As a result, WIP must always exist in front of a bottleneck or the bottleneck operation will be starved and will stop. Improved Customer Satisfaction Lean focuses on minimising the time and expense for a new product development. This helps the product to market faster, easier to incorporate current requirements in to the product. With the usage of less capital intensive machine, tools and fixtures, it makes the product more flexible and less initial cost to cover. As a result, product life cycles may be shorter. Profitability does not suffer and brand loyalty is increased, as customers prefer to buy products and services from a perceived innovator. Supply Chain as a Competitive Weapon A lean supply chain enables the firms or partners in the supply chain to align themselves with each other and to coordinate their continuous improvement efforts. This synthesis enables even small firms to participate in the results of lean efforts. Competitive advantage and leadership in the global marketplace can only be gained by applying lean principles to the supply chain. Thought, commitment, planning, collaboration, and a path forward are required. 3. 15 Path Forward in the lean supply chain Companies are investing in software, hiring consultants, and reconfiguring their physical supply chains in order to capture the promised returns from lean supply chain management. Yet the returns from these investments can be elusive. What these companies may not realize is that it’s not about expense reduction or profit enhancement—it’s about creating capacity for growth. Lean is a cooperative process for survival and for success. Supply chains that want to grow and continue to improve must adopt lean. Lean concepts require an attitude of continuous improvement with a bias for action. The concepts of lean apply to all elements of the supply chain, including support departments such as product development, quality, human resources, marketing, finance, purchasing, and distribution. Leaning "other" areas presents a larger challenge than it does in manufacturing. Supervisors and factory workers embrace change that results in 87
Lean Thinking in Supply Chain making their lives less complicated and more successful. In the hierarchy of support areas, it is more challenging for the people to understand how lean can benefit them. The answer is simple: What benefits the organization as a whole benefits the supply chain. (Bruce Tompkins, 2003)Because the Internet provides us with unprecedented opportunities for sharing information and conducting transactions across the supply chain, companies should have a sense of urgency about adopting lean concepts. But all chain partners have to be on the same playing field, and the lean concept is intended to let everyone reach new levels of efficiency and effectiveness. Supply chain leaders should not delay—it's urgent to act now to implement lean concepts in the supply chain. 3.16 Summary The third chapter discusses the concept of Supply chain and Supply chain management. It shows how no product, company or industry can survive without it. Due to globalisations, companies and industries are working from different part of the world; an ordinary supply chain management won’t do to sustain competition which is why lean thinking concepts need to be applied along with supply chain management. This chapter also shows how the efficiency of the supply chain increases with the lean principles applied to it.
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Lean Elements and Techniques
CHAPTER 4
LEAN ELEMENTS AND TECHNIQUES
4.1 Introduction Lean as a concept is used and is being used as a performance based process in organisations to increase their competitive advantage. The basic objective of the lean activity is continuous improvement which is done by the elimination of waste or non value added steps with in an organisation. The most important challenge faced by the management is to create a culture of transformation and sustain commitment from the top management through out the entire workforce. (Knuj, 2000)
But the question always arises, what is exactly lean? Is it just a concept on its own? Or is it a concept which requires other techniques or elements for the successful implementation? Or is it just an action? Or a combination of all these; now though lean is a concept with a long history, its practices are being recognised after much years in the other industries. The interest towards lean is growing. Many organisations in different industries are using the concept of lean thinking as competitive tool. Therefore implementing lean gives them the competitive edge over the other organisations.
People attend conferences or lean training sessions, so the missing links of lean can be studied. People need to be aware that lean is a thought process or a belief system and not just a set of tools or procedures or logical steps. It is clearly understood that the 5 principles of lean alone is not enough for the proper implementation of the concept in the organisation. There are a set of techniques and elements that are adopted by the lean management which will help them in the implementation of lean.
Creating a lean culture provides a rationale and practical guide to implementing the missing link that is needed to sustain the lean principle implementation. (Mann, 2005)
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Lean Elements and Techniques The lean principles form a base to the implementation but these techniques are very essential to make the lean implementation efficient and successful. Therefore in this chapter we shall look into the techniques which will help in implementing lean. We will also look into every technique to see how the technique influences lean and the organisation when adopting it.
4.2 Why Lean Techniques? The importance It is considered that an organisation, management or office is made efficient by implementing lean, but the path to reach there is not smooth and quick but a bumpy ride. As Stan Barry from Shropshire-based manufacturer CS Contract Furniture warns: "It’s an incredible area... [But] it's a minefield when you walk into lean." The implementation does take time but just like every process, it has a series of techniques and elements which help in making the implementation a lot simpler. These techniques and elements help in making the transformation process a success. (Rowlands, 2006) These principles and techniques have its roots back in the Japanese manufacturing industry where it’s been applied in many other industries and proven successful. During the explanation of the techniques and elements of lean, it will be clearly noticeable that all these techniques are either activities, philosophies or concepts which are interrelated with each other and that these techniques and elements are necessary for the critical and successful implementation of the basic lean principles. (Feld, 2001)
These techniques are both dependent and independent of each other. All the techniques need not be applied when implementing lean. Given below is the diagram and explanation of some of the concepts. (Please turn over)
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Lean Elements and Techniques Figure 4.1: Elements & Techniques of Lean…
4.3 Andon (アンドン アンドン, アンドン あんどん, あんどん 行灯) 行灯 The Andon system is one of the principal elements of Jidoka which was pioneered by Toyota. Andon is a visual control device used to notify the management, maintenance, and other workers of any sort of quality or process problem which occurs in the factory floor. The centre piece of the Andon is actually sign board which has signal lights to indicate that the work station has a problem. This alert of the Andon is activated either manually by a worker using a pull cord or automatically by the equipment itself. At times, the Andon system may include a means to stop the entire manufacturing process or any particular factory process so that the problems can be corrected first. As of recently the system of Andon is been adopted as a lean technique which helps the lean adopters to identify mistakes in their processes immediately with the help of the Andon signal board. It gives the worker the ability to stop the process at any time when a defect is found and call for assistance immediately, so that process can get back to its normal working procedure instantly. 91
Lean Elements and Techniques Work is stopped until a solution has been found. The alerts may be logged to a database so that they can be studied as part of a continuous-improvement program. (Mike, 2002)
Figure 4.2: Traditional Andon Board…
Source: http://en.wikipedia.org/wiki/Andon
The system typically indicates where the alert was generated, and may also provide a description of the trouble. Modern Andon systems can include text, graphics, or audio elements. Audio alerts may be done with coded tones, music with different tunes corresponding to the various alerts, or pre-recorded verbal messages. The traditional Andon had a lot of disadvantages when compared to the modern Andon scoreboards. The traditional once have been very basic and quite expensive to install in the production process. It displayed very basic information in the signal board, the data displayed is generally fixed, with restricted headings, and they limit to a snap shot view of what happening on the factory floor. Another disadvantage is that when the display changes the data is lost. But now when Andon used in lean methodology and with the help of Gemba solutions has addressed all the issues and provides a fully flexible and user configurable LCD display with whole host of additional features. (Gemba Solutions, 2007)
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Lean Elements and Techniques Figure 4.3: Modern Andon Board…
Source: Gemba Solutions (2007), “Andon Scoreboard”, Issue. 3, available at: www.oeeimpact.co.uk
What are the benefits?
Flexible LCD Display... You can program the display to show what ever data you like You can change how the display looks whenever you like Off-the-shelf delivery means no long waits for equipment to arrive It’s more than a snapshot... All the data is available for review and analysis on a historical basis on your PC desktop. Rapidly identify any problem areas in your process and take corrective action. Provide management reporting quickly and easily and when there’s a problem. Display messages and alerts on the Scoreboard. Automatically escalate problems to senior staff via email, text, pager etc. Automatically trigger alerts based on any aspect of your production process.
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Lean Elements and Techniques Go wireless... Put button boxes anywhere without worrying about all the wires. Move button boxes around as much as you like. Supervisors can move around the shop floor and take a button box with them. No need to wait ages for an electrician to come and install things. Minimal cabling means minimal cost to install. (Gemba Solutions, 2007)
4.4 Heijunka (平準化 平準化) 平準化 Heijunka is again a Japanese terminology which refers to system of production, which helps in a more even and consistent flow of work. Heijunka as a concept or technique is very closely related to lean thinking in production and just in time manufacturing. Figure 4.4: Ohno’s teachings…
Source: http://membres.lycos.fr/hconline/lean/heijunka_us.htm In Ohno's teaching, there is the tale of "the slower but consistent tortoise causes less waste and is much more desirable than the speedy hare that races ahead and then stops occasionally to doze”. The above is the illustration of the leveling principle in which the workload is leveled for continuity which is the consistency of the tortoise which better creates flow regardless to the orders variation which is the dashing of the hare. (Hohmann, 2006) 94
Lean Elements and Techniques Principle According to Hohmann (2006) production levelling is based on orders analysis (products and volumes mix) in a given time span (one month, for example) in order to find out a pattern fitting in a smaller time span (daily, for example). This pattern is to be repeated until the whole demand (of the month) is satisfied. Heijunka – the key concepts Heijunka is defined as “The distribution of production volume and mix evenly over time” (Reyner et al., 2004) Heijunka converts uneven customer pull in to even and predictable manufacturing process Heijunka is generally used in combination with other key Lean principles to stabilize value flow Heijunka is a core concept that helps bring stability to a manufacturing process Need For Heijunka Heijunka means two different, but related, things. One is the leveling of production by volume. The other is leveling production by product type or mix. There are number of reason for implementing this technique - Product leveling Larger batches of the same product may reduce set up times and change over, but usually results in
Long lead times
Swelling inventories
Greater opportunities for defects
Excessive idle time and/ or over time
Even a mix of products is critical to avoid these impacts. Most value streams produce a mix of products and therefore face a choice of production mix and sequence. It is here that the discussions on economic order 95
Lean Elements and Techniques quantities take place and have been dominated by changeover times and the inventory this requires. Toyota's approach resulted in a different discussion where it reduced the time and cost of changeovers so that smaller and smaller batches were not prohibitive and lost production time and quality costs were not significant. This meant that the demand for components could be leveled for the upstream sub-processes and therefore the lead time and total inventories reduced along the entire value stream. In order to simplify leveling of products with different demand levels a related visual scheduling board known as a Heijunka box is often used in achieving these Heijunka style efficiencies. Other Production leveling techniques based on this thinking have also been developed. (Jones, 2006) Figure 4.5: Heijunka Box…
Source: Jones, D.T. (2006), “The Heijunka box- a simple tool for levelling production”, manufacturing engineering magazine, August 2006
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Lean Elements and Techniques Challenges for Heijunka According to Reyner et al. (2004), the challenges are (Please turn over) Technical Factors Tools needed for large scale leveling are lacking. With Heijunka, there is a need for larger finished good inventory. This is as antithetical to the lean mission Obsolescence of finished parts. Predicting demand is not proper, bad data can ruin process Social Factors Heijunka depends on direct customer contact and accurate information about projected future events. Reduces operator’s flexibility which can draw resistance. Requires discipline and much more planning.
4.5 Jidoka (自働化) - Autonomation (自働化) The word "autonomation" is a loan word from the Japanese language, it is a portmanteau from and a pun on the word "automation", which is written using three kanji characters: 自 "self", "動" "movement", and 化 "-ization". In the Lean system and the TPS, the second character is replaced with 働 "work", which is a character derived by adding a radical representing "human" to the original 動. Jidoka, another Japanese management terminology and an important technique in the lean implementation system can be described “intelligent automation” or “automation with a human touch”. With the help of Jidoka, it prevents the production of defective products, eliminates over production and focuses on solving the problem so that it never occurs. Jidoka helps in guiding the process control practice in number of industries. This practice speeds up the root cause investigation and prevents problems from being pushed down the line into a final product. But according to Bengt Stom 97
Lean Elements and Techniques (2007) there is still a wide spread confusion over how to define Jidoka. (Shanley, 2007) Principle Jidoka is a quality control process which applies the following four principles:
Detect the abnormality
Stop
Fix or correct the immediate problem
Investigate the root cause and install a countermeasure
Purpose of Implementation The purpose is to free equipment from the necessity of constant human attention, separate people from machines and allow workers to staff multiple operations. Also Jidoka is to makes possible the rapid or immediate address identification and correction of mistakes that occur in a process. Autonomation or Jidoka relieves the worker of the need to continuously judge the operation of the machine; their efforts are now only engaged when there is a problem alerted by the machine. The first example of this at Toyota was the auto-activated loom of Sakichi Toyoda that automatically and immediately stopped the loom if the vertical or lateral threads broke or ran out. Jidoka – Line stoppage
When applying Jidoka into a process, it is very essential to stop the process line when there is a problem. At Toyota, every worker has the authority and responsibility to stop an entire line when the problem arises. The purpose is to bring the attention of the problem to the concerned authorities regardless of how small it is, and focus efforts to find a permanent solution. (Harriman, 2000) This brings about a long term solution to the process of the company.
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Lean Elements and Techniques Relationship with JIT Taiichi Ohno and Sakichi Toyoda, originators of the TPS which has become the lean system considered JIT & Autonomation or Jidoka the pillars upon which TPS is built. Jeffrey Liker (2004) and David Meier (2004) indicate that Jidoka or "the decision to stop and fix problems as they occur rather than pushing them down the line to be resolved later" is a large part of the difference between the effectiveness of Toyota and other companies who have tried to adopt the lean system. Jidoka therefore can be said to be a key element in successful Lean thinking implementations. For "just-in-time" (JIT) systems, it is absolutely vital to produce with zero defects, or else these defects can disrupt the production process - or the orderly flow of work. JIT and Lean are always searching for targets for continuous improvement in its quest for quality improvements, finding and eliminating the causes of problems so they do not continually crop up and this can be achieved by the implementation of Jidoka. Confusion over Jidoka Taiichi Ohno considered Jidoka one of the two pillars of the Toyota Production System (TPS). Yet this aspect of TPS is mostly ignored in the West. When it is discussed, there is a lot of confusion and misunderstanding. There are several reasons, among them:
Japanese language (at least in everyday usage) seems less precise than English and the several meanings of Jidoka do not translate well.
For historical reasons, the autonomation concept seems less relevant today and more like ordinary good sense and practice.
The line-stoppage version of Jidoka requires a strong stomach and purity of mind that few managers (Japanese or American) possess.
. Later, the idea of stopping everything when something went wrong was transferred to manual assembly and the "Jidoka" term transferred as well. (Harriman, 2000) 99
Lean Elements and Techniques 4.6 Kaizen (改善) Introduction to Kaizen Again the term Kaizen is a Japanese philosophy which focuses on continuous improvement throughout all aspects. When applied in workplace, Kaizen activities continually improve all functions of a business, from manufacturing to management and from the CEO to the assembly line workers. It involves setting organizational standards and then continually improving those standards. Kaizen is a daily activity, the purpose of which goes beyond simple productivity improvement. It is also a process that, when done correctly, humanizes the workplace, eliminates overly hard work ("Muri"), and teaches people how to perform experiments on their work using the scientific method and how to learn to spot and eliminate waste in business processes. (Imai, 1986)
Kaizen & Management Management has two major components in Kaizen. They are maintenance and improvement. Maintenance involves activities of maintaining current standards of technology, management and operation. Improvement involves improving these standards.
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Figure 4.7: Japanese perceptions of job functions… Top Management Middle Management Supervisors
Improvement Maintenance
Workers
Source: “Kaizen – The key to Japan’s competitive success”, Imai, M (1986)
Figure 4.8: Improvement broken down into innovation and KAIZEN… Top Management
Innovation KAIZEN
Middle Management
Maintenance
Supervisors Workers
Source: “Gemba Kaizen”, Imai, M (1997)
Maintenance component: Management establishes policies rules and directions for major operations and assigns tasks for all in the company to follow a set of Standard Operating Procedures (SOP). It needs to apply discipline if these are not carried out according to norm and provide training or review the policy if people are unable to follow it. Improvement component: Improvement involves raising existing standards to higher levels. Once done, management needs to consider those as standard and modify policies accordingly.
Improvement can be broken down into two sub-sections which are Kaizen and innovation. Kaizen denotes making continuous small improvements and innovation involves a drastic improvement in new technology and/or equipment. (Imai, 1986)
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Lean Elements and Techniques The process of Kaizen The following steps need to be completed in order to complete the KAIZEN process: (i)
Select the theme of the problem.
(ii)
Understand the current status and objectives of selecting the theme.
(iii)
Analyzing the data thus collected to identify root causes of the problem.
(iv)
Establish counter-measures based on the data analysis.
(v)
Implement counter-measures.
(vi)
Confirming the effects of the counter-measures.
(vii)
Establish or revise the standards to prevent recurrence.
(viii) Review the above processes and work on subsequent steps.
Gemba Kaizen.
Meaning of Gemba Gemba is Japanese means “real place” or the place where the real action occurs. For example in a Manufacturing Management context, it refers to the shop-floor work place. The main value adding activities which allow the company to earn profits and satisfy the customer: developing, producing and selling mainly take place in the shopfloor, which is Gemba. Kaizen should begin and develop in Gemba. Gemba needs to be involved with two major activities, namely maintenance and Kaizen, wherein managers must engage in one or the other of these two activities. The process of Gemba Kaizen involves continuously identifying unwanted or unnecessary wastes or processes and eliminating them (at least reduce them). The procedure for attaining Kaizen in Gemba is first to go to the Gemba and check for 102
Lean Elements and Techniques non-value adding processes or wastes. This process is called “Gembutsu”. Measures need to be taken at the same place to find the root cause of the problem and attempt to finish it. The last step is to standardize the process to prevent the recurrence of the problem. (Imai, 1997) 4.7 Muda (無駄), Mura 斑, Muri 無理 Ever heard of Muda, Mura and Muri? These three terms may seem completely unfamiliar, but they are very important elements which contribute to the sustainability of the organisation or process and when eliminated, it increases the competitiveness. These terms are traditionally Japanese and were originated in Toyota for the Toyota Production System. Years ago two senior managers, Taiichi Ohno and Shigeo Shingo, were examining the waste in their factory when they gave it the umbrella term of "Muda" meaning activity that is wasteful and doesn't add value. This led to the definition of seven kinds of "Muda", the two other wastes such as "Mura", meaning "unevenness" and "Muri" meaning "overburdening". Given below is the diagram of the 3 Mu’s. (Please turn over)
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Figure 4.8: Muda+ Mura+ Muri…
Source: (McBride, 2003; Pichler, 2008)
These three terms are central to lean thinking, and though they were developed in the context of a busy car plant, they apply increasingly to the housing and construction sectors where, of course, waste should be minimised, if not eliminated.
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4.7.1 Muda (無駄) Muda is a traditional Japanese term for an activity which doesn’t create any value or is unproductive in practice. Waste reduction is an effective way to increase profitability. Lean is called for the very fact that it uses less of everything required to produce a product of better quality. (Naylon et al., 1999) Muda has been given much greater attention these days. Each of these classes of Muda involves a whole family of blunders, which range from activities like having to inspect a product to see if it has the quality it should have had in the first place (an unneeded process step). The seven wastes The seven wastes identified by Taiichi Ohno are: (McBride, 2003) The primary step in the lean thinking process is the identification of which steps in the process add value and which do not. Once the classification of these two categories is done, it is then possible to implement the action by improving the former and eliminating the latter. The following are the seven deadly waste which has been identified by Ohno and are integral to the concept of lean thinking. Defects Quality defects prevent the customers from accepting the defected product. The effort to create these defects is wasted. New waste management processes must be added in an effort to reclaim some value for the otherwise scrap product. If recording all of the non-value added activities carried out in a typical manufacturing company, do not be surprised to find out that 99% of all activities carried out are non-value adding, even the best manufacturers manage 96%. Overproduction Often caused by quality problems, a company know that it will lose a number of units along the production process so produces extra to make sure that the customer order is 105
Lean Elements and Techniques satisfied. These kind of issue can be tackled using mistake proofing methods (Pokayoke) and by understanding the machine process capabilities of the production equipment. Conveyance Factory layouts can often be the fundamental cause of excess transportation. When appropriate, re-laying out the machines within a factory from a functional to a cellular layout has been found by many companies to help not just reduce transportation waste but also reduce Work in Progress (WIP) and waiting. Waiting Products waiting around in factories either as finished goods or work in progress (WIP) another major cause of waste; WIP is commonly caused by producing large batch sizes where again SMED techniques can help. Inventory Many companies order over and above what is required to fulfil the order, this may be due to quality problems along the production process or the often mistaken belief that is saves money by ordering larger quantities. Motion This waste is related to ergonomics and is seen in all instances of bending, stretching, walking, lifting, and reaching. These are also health and safety issues, which in today’s litigious society are becoming more of a problem for organizations. Jobs with excessive motion should be analyzed and redesigned for improvement with the involvement of plant personnel.
Over processing Rework is a typical example of over processing as discussed earlier reducing the root cause of the quality problem is solution eliminating rework. Techniques such as 5 whys, SPC and mistake proofing (Pokayoke) are available to help identify and eliminate causes of quality defects. 106
Lean Elements and Techniques Other wastes There are others who have proposed various other wastes which have to be considered when applying lean. Such waste will apply more to the people who proposed it According to Estrem (2006), the other wastes are: Latent Skill Organizations employ their staff for specific skills that they may have. These employees have other skills too; it is wasteful to not take advantage of these skills as well. "It is only by capitalizing on employees' creativity that organizations can eliminate the other seven wastes and continuously improve their performance." Danger Unsafe work areas creates lost work hours and expenses. Poor Information Age of electronic information and enterprise resource planning systems requires current / correct master data details. Breakdown Due to poor maintenance, equipment used to produce may breakdown. This can cause delays in production regularly. This is why we implement a TPM program (Total Productive Maintenance) is a method used to achieve maximum equipment effectiveness through employee involvement. 4.7.2 Mura 斑 This is another word part of Muda which means unevenness, inconsistency in physical matter or human spiritual condition. Mura is avoided through Just in Time systems which are based on little or no inventory, by supplying the production process with the right part, at the right time, in the right amount, and first-in, first out component flow. Just in Time systems create a “pull system” in which each subprocess withdraws its needs from the preceding sub-processes, and ultimately from an 107
Lean Elements and Techniques outside supplier. When a preceding process does not receive a request or withdrawal it does not make more parts. This type of system is designed to maximize productivity by minimizing storage overhead which reduces the Mura and increase efficiency. (Pichler, 2008) 4.7.3 Muri 無理 This is a Japanese term for overburden or unreasonableness which have become popularised in the west because it is used as a key concept in TPS. (Pichler, 2008) Muri can be avoided through standardized work. Standardized work encourages the close examination of 1. Ergonomic and Safety questions 2. Quality issues 3. Productivity, and 4. Cost benefits When everyone knows the standard condition, and the standardized work sequences, the results observed are: •
Employee morale is heightened,
•
Higher quality is achieved,
•
Productivity is improved, and
•
Costs are reduced.
The Muda, Mura and Muri are the three Mus’ of the lean thinking principle. As mentioned earlier, these elements of lean are very important and must be identified. It is noticed that with the identification and implementation of these elements of lean, many other techniques will be initiated like JIT, standardised work etc. Therefore the lean adopters have to make this an integral part of the lean implementation system.
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Lean Elements and Techniques 4.8 Poka-yoke (ポカヨケ) Every one makes mistakes; traditionally managers thought it was because of the carelessness of the worker. But the lean thinking system understands that such mistakes are not made by the worker but the system itself. Therefore a technique is required which is mistake proof in nature. This is called as Poka Yoke. Shigeo Shingo, a Japanese manufacturing engineer is the one who developed the concept of Poka Yoke. This revolutionised the quality profession in Japan. This concept was originally called ‘fool proofing’ and later changed to ‘mistake proofing’ or ‘error proofing’ to avoid offending the employees. Poka Yoke is a result in an operation that waste less energy, time and resources doing things wrong in the future. The simple the Poka-yoke, the better and more efficient it would be in the organisation. (Dvorak, 2008) Purpose The main aim and purpose of this technique is to reduce the defects from mistakes using the simplest and the lowest cost technique possible. Poka yoke is implemented by using simple objects like fixtures, jigs, gadgets, warning devices or paper systems to prevent people from making mistakes—even if they try to. These objects, known as Poka yoke devices, are usually used to stop the manufacturing process and alert the operator if something is about to go wrong. (Crickey et al., 2007) Characteristics of Poka Yoke devices According to Crickey et al. (2007), the characteristics of the Poka-yoke devices are: Simple and inexpensive Useable by any operator Placed close to where the mistakes occur, providing quick feedback to the operator so that the mistakes can be corrected Part of the process It is a very simple principle and can be applied by any one at any time and this can lead to the massive saving of both time and money 109
Lean Elements and Techniques Poka Yoke in Practice Poka yoke is at its best when it prevents mistakes, not when it merely catches them. Since human errors usually stem from people who get distracted, tired or confused, a good Poka yoke solution is one that requires no attention from the operator. Such a Poka yoke device will prevent the occurrence of mistake even if the operator loses focus. (Crickey et al., 2007)
Poke yoke is a critical component of the Lean system. Simplifying processes, reducing errors, associated waste and costs brings value to operations. In turn, customers who benefit from such operation view value-added suppliers as “partners” rather than just interchangeable vendors. Poka yoke systems similarly will keep innovating, their method which will reduce the cost of failure dramatically. No defective part will be passed to the next process. So at the end of the process you can trust that you have a good quality parts on your hand. Poka yoke is one of the critical steps in the lean journey. 4.9 Kanban (看板) Kanban, a technique for work and inventory release, is a major component of the Lean thinking philosophy. It was originally developed at Toyota in the 1950s as a way of managing material flow on the assembly line. Over the past three decades the Kanban process, a highly effective factory production system, has developed into an optimum industry environment leading to global competitiveness. (Fujitsu Company)
Kanban stands for Kan- card, Ban- signal. The essence of the Kanban concept is that a supplier, the warehouse or manufacturing or supply chain should only deliver components as and when they are needed, so that there is no excess Inventory. Within this system, workstations located along production lines only produce/deliver desired components when they receive a card and an empty container, indicating that more parts will be needed in production. In case of line interruptions, each workstation will only produce enough components to fill the container and then stop. (Olson, 1996)
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Lean Elements and Techniques In addition, Kanban limits the amount of inventory in the process by acting as an authorization to produce more Inventories. Since Kanban is a chain process in which orders flow from one process to another, the production or delivery of components are pulled to the production line, in contrast to the traditional forecast oriented method where parts are pushed to the line.
Figure 4.9: Kanban System…
Source: http://en.wikipedia.org/wiki/Kanban
Kanban System
The system employs cards or signals to link processes that are used to replenish stocks usually within a pull system. This provides a scheduling signal, which disciplines output replenishment based upon customer usage. A typical application is a “Two Bin System”, where the reorder card is placed at the bottom of the first bin. When this bin is empty, a third party supplier or previous workstations use the reorder card to replenish the bin, whilst these parts are being sourced the second bin is employed, such that when the first bin is replenished, the second is ready for replenishment. It is worthwhile noting that without the reorder card, no replenishment will take place ensuring that over stocking doesn’t arise. This type of system would be typically managed by visual means, which enables these systems to be set up relatively quickly. (Agility centre, 2002)
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Lean Elements and Techniques Where appropriate A Kanban system is best suited to products with high volume sales of which have a high stock turn and products of low complexity. (Russel et al., 1998)
Risks The stocking quantities and re-order levels need to be calculated accurately otherwise you run the risk of over stocking or even running out of stock. However, due to the nature of the “Two Bin System” it does mean that large amounts of floor space are required to store this inventory. For managing these stocks, visual management system training is paramount. Staff should know that as soon as a bin becomes empty it should be replenished. If a computer-based system is chosen, then the data on the system must be accurate and up to date. Strict procedures must be followed on receiving and issuing stock and these needs to be done on a regular basis. Benefits When proper implementation of accurate stocking quantities and re-order levels, it means that you are greatly reducing the risks of over stocking or even running out of stock; the benefits of employing a visual management system are that it is quick to implement. If a computer-based system is chosen then the benefits are that a central data source is generated and reports can be run to calculate what to order and when. This enables companies to easily manage complex products. The data helps in the collection of accurate performance measurement and other issues. Therefore Kanban plays a very important in the lean system in managing the inventory in an efficient way.
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Lean Elements and Techniques 4.10 Takt Time The concept of lean thinking is a system which works on a continuous systematic rhythm. In fact the whole organisation works on the rhythm provided by the customer who demands for the final product. This rhythm is known as the TAKT time of the system. This is the ultimate pull scheduling system anyone can think about. Takt time is the fundamental concept to do with the regular, uniform rate of progression of products through all stages from raw material to customer. It should also be a consideration along a complete supply chain. "Sell daily? Make daily!" is the underlying idea. Takt time is the drumbeat cycle of the rate of flow of products. It is the "metronome" (from the German origins of the word). Understanding takt time is fundamental to analysis and mapping of Lean Operations. (www.strategosinc.com) Takt time is most simply the average rate at which customers buy products and hence the rate at which products should be manufactured. It is expressed in time units: one every so many minutes or so many minutes between completions. The TAKT Time can be calculated using simple formula given below. (wikipedia.org) Takt Time is defined as:
Where: •
Ta = Net Available Time to Work e.g. [minutes of work / day]
•
Td = Total demand (Customer Demand) e.g. [units produced / day]
•
T = TAKT Time e.g. [minutes of work / unit produced]
History of Takt Time Takt is a German word which refers to the beat of music. It can also mean cycle, rhythm or repetition time.
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Lean Elements and Techniques During the 1930's, Germany and Japan were part of the Axis and German engineers helped organize the Japanese aircraft industry. They used the analogy of setting rhythm for the entire orchestra. After the war, Toyota picked up the word and concept for its Just In Time, Toyota Production System or Lean Thinking system. Benefits of Takt time The simplicity of the concept belies its extraordinary effects. Among these are: (www.strategosinc.com) Production Stability- by limiting overproduction, it stabilizes the system and prevents build ups of inventory and the subsequent. Work cell Design- Takt time helps cell designers. In an ideal work cell, all tasks are balanced, they all require the same time to execute and that time equals the Takt time.
Psychological- immediate feedback of performance is a powerful motivator. When a work cell team tracks takt time, they have a heightened awareness of output rates and potential problems. They attempt to achieve the Takt time on each cycle and immediately make necessary corrections. When Charles Sorensen conceived and built the Willow Run Bomber plant, he designed it for "A bomber an hour". He did not say "nineteen ships per day" or "120 per week." Sorensen understood the value of steady, repetitive output. Limitations of Takt time Takt time is useful for simple cells. These are typical of the work cells at Toyota and what most people think of when they picture a cell. Such cells have: Minimal Setups A Single Routing Identical Work Times for All Products
Problems can result from an unjustified preoccupation with Takt time. Designers who think only of Takt time may conclude that certain products cannot use Cellular Manufacturing and their companies lose the many benefits.
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Lean Elements and Techniques In other situations, an obsession with Takt time, One Piece flow and linear cells leads to unsuitable designs. Takt time is a powerful and valuable concept. Like all intellectual constructs, it has limits but is very beneficial technique of lean. 4.11 5S Introduction What is 5S? 5S is a procedure that organizes individual workstations or departments. The objective of 5S is to increase efficiency at the micro-level by keeping the workplace neat, orderly and accessible. The results are visually dramatic and also increase pride and morale. There are many variations of 5S, mostly of minor importance-- for example, different translations of the original Japanese. The extent of the organization effort also varies. Some versions are little more than a cleanup while others involve time and motion studies or layout. Safety is often included as a step to eliminate unsafe conditions and enhances awareness. The key targets of 5S are workplace morale and efficiency. The assertion of 5S is, by assigning everything a location, time is not wasted by looking for things. Additionally, it is quickly obvious when something is missing from its designated location. Advocates of 5S believe the benefits of this methodology come from deciding what should be kept, where it should be kept, and how it should be stored. This decision making process usually comes from a dialog about standardization which builds a clear understanding, between employees, of how work should be done. It also instills ownership of the process in each employee.
What Does 5S Accomplish? 5S improves efficiency at the micro-level. It can eliminate searching for tools, for example. It may eliminate wasted steps or long reaches that are ergonomically
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Lean Elements and Techniques hazardous. Since workers themselves analyze and rearrange their own workplace, it forces each worker to think about their activities. It develops the "Kaizen Mind." 5S is a philosophy and a way of organizing and managing the workspace and work flow with the intent to improve efficiency by eliminating waste, improving flow and reducing process unreasonableness
The Elements of 5S
The table below summarizes the five elements. Most elements are straightforward and self explanatory. The five words are a convenient mnemonic device. They derive from equivalent Japanese words which also started with an S. Each, however, involves much more than the word alone implies.
Table 4.1: 5S
1 Sort
Sort through and sort out junk, seldom-used items and necessary items.
2 Shine
Clean and paint and clean regularly.
3 Set
Set locations; use boundaries & addresses to assure recoil.
4 Standardize
Define and standardize work processes, 5S activities and tasks.
5 Sustain
Make 5S a way of life, institutionalized in the organization.
Source: http://www.strategosinc.com/5S.htm
5S is a reference to a list of five Japanese words which, transliterated and translated into English, start with the letter S and are the name of a methodology
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Lean Elements and Techniques The 5S's are: Phase 1 - Seiri (整理) Sorting: Going through all the tools, materials, etc., in the plant and work area and keeping only essential items. Everything else is stored or discarded. Phase 2 - Seiton (整頓) Straighten or Set in Order: Focuses on efficiency. When we translate this to "Straighten or Set in Order", it sounds like more sorting or sweeping, but the intent is to arrange the tools, equipment and parts in a manner that promotes work flow. For example, tools and equipment should be kept where they will be used (i.e. straighten the flow path), and the process should be set in an order that maximizes efficiency. Phase 3 - Seiso (清掃) Sweeping: Systematic Cleaning or the need to keep the workplace clean as well as neat. At the end of each shift, the work area is cleaned up and everything is restored to its place. This makes it easy to know what goes where and have confidence that everything is where it should be. The key point is that maintaining cleanliness should be part of the daily work - not an occasional activity initiated when things get too messy. Phase 4 - Seiketsu (清潔) Standardizing: Standardized work practices or operating in a consistent and standardized fashion. Everyone knows exactly what his or her responsibilities are to keep above 3S's. Phase 5 - Shitsuke (躾) Sustaining: Refers to maintaining and reviewing standards. Once the previous 4S's have been established they become the new way to operate. Maintain the focus on this new way of operating, and do not allow a gradual decline back to the old ways of operating. However, when an issue arises such as a suggested improvement, a new way of working, a new tool, or a new output requirement then a review of the first 4S's is appropriate. A sixth phase "Safety" is sometimes added. Purists, however, argue that adding it is unnecessary since following 5S correctly will result in a safe work environment. 117
Lean Elements and Techniques When to Implement 5S This is a point for debate. Many firms start their Lean Journey with 5S. Setting implementation priorities involves many factors. It may be best to start with an element having faster and more verifiable savings. The other side argues that, initially, 5S can be relatively easy to implement and has direct benefits. Moreover, it establishes a standard of discipline that begins the cultural change necessary for other elements of Lean Manufacturing. Ultimately, there are many paths to Lean and it is probably more important to just start then it is to find the "correct" path.
4.12 Shojinka: Shojinka (flexible workforce) is a framework for efficient utilisation of human resources. It aims at preventing idle time and boredom by employing the twin strategies of: (i)
Multi process holding
(ii)
Multi skilled worker
4.13 Ugoki: It involves in reduction in man-hour movements to eliminate wasted motions and transforming them into work. This is sub related to Muda of motion.
4.14 Ninben no tsuita jidohka: This human-centred approach to automation benefits from autonomous machines, machines that stop when they make an error. Toyota team members call production on such machines “automation with a human touch” (ninben no tsuita jidohka) or autonomation.
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Lean Elements and Techniques 4.15 Kaizen Teian: Kaizen Teian is a system for generating and implementing employee ideas. Japanese suggestion schemes have helped companies to improve quality and productivity, and reduced prices to increase market share. They concentrate on participation and the rate of implementation, rather than on the quality or value of the suggestions. The emphasis is on encouraging everyone to make improvements. (Wikipedia.org)
There lean thinking concept has a lot more elements and techniques such as Just in Time, SMED etc; which could not be covered in the dissertation because of world limit restrictions. .
4.16 Summary In the second chapter, the principles are explained in detail. But when the lean thinking is implemented in an industry, it is very important to understand that the execution of lean thinking is possible only with a combination of both the principle and the element and techniques of lean; which is why the fourth chapter explains some of the important elements and techniques of lean. These elements and techniques are really important and play a major role in the lean thinking concept.
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Comparative Study of Lean Principles in the Construction & Aerospace Industry
Chapter 5
Comparative Study of Lean Principles in the Construction & Aerospace Industry 5.1 Introduction The concept of lean has proved to be successful in the manufacturing industry. The industry has seen dramatic improvements in productivity and quality, while reducing cost and lead times with lean. Now, though, lean has its roots in the manufacturing industry, its principles have been adopted by other industries such as construction, aerospace, service, supply chain etc. In this chapter, a comparative study of the principles of lean in the construction and aerospace industry will be done to understand the wide scope of the lean thinking practices across these industries.
Managerial practices are rarely universally applicable irrespective of their context. With the implementation of the same managerial concept to different sectors, not only the processes of diffusion of such practices differ, but also their ultimate manifestation. Also when such managerial practices are being implemented, it must be further understood that no industry is ever static; industry sectors are constantly in a state of flux as they respond to external pressures. (Green et al., 2004)
The aerospace and the construction sectors were not chosen because they are similar, but they were chosen because they are so different to each other. The construction industry is highly fragmented and the aerospace sector being highly consolidated. Both the sectors differ highly in terms of their structure and technological intensity. Aerospace is perhaps the ultimate of globalised industries. In construction the majority of the project remains rooted in a local context But comparing the construction and aerospace, highlights the unique characteristics of both the industries and how the lean practices help both the industries in separate ways. (Green et al., 2004)
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Comparative Study of Lean Principles in the Construction & Aerospace Industry However both of these industries involve the management of complex operations and strive to deliver a quality product in the shortest feasible time. More over the main aim of these industries is to save money and stay competitive in the market. So giving these similarities, it is possible to apply the lean thinking principles of manufacturing into aerospace and construction and see if the similar benefits and results are obtained. So the primary question. Do lean practices hold potential for improving the aerospace and construction industry?
5.2 Nature of Construction Industry According to a study conducted in Denmark by Erhvervsfremme Styrelsen (1993), the construction industry is divided into two parts. One is the construction part and the other the Industry part. The study also recognised that the development of the construction industry productivity as a whole would be difficult as it would call for different means. If the industry part had to improve, it had to take place only through market mechanism and for the productivity of the industry to improve further; the construction part had to have an efficient final product. Now this development of the construction part would involve a number of public initiatives and applications of high end managerial concepts such as lean management, value management, and cooperation and learning as the basis of a new kind of construction management. Therefore it shows the need of such practices to make the construction industry productive and efficient. (Berteslen, 2004)
5.3 Lean Construction: Brief History As known, to a great extent the concept of lean construction is an adaptation and implementation of the Japanese manufacturing principles with in the construction practices, so with this in mind, lean construction assumes construction to be like a production process –a special one. (Berteslen, 2004)
Though the actual principles of lean construction were not formulated after ten years of work by Koskela (2000) and later by Ballard et al (2001), one may think that originally they were: creating value for the customer through reducing waste.
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Comparative Study of Lean Principles in the Construction & Aerospace Industry Koskela (1992 and 2000) during the initial stages of lean construction proposed the Transformation – Flow – Value (TFV) understanding of construction. Koskela and Howell (2002) emphasised on the flow aspects of construction during the transformation stage of the industry.
According to Berteslen (2004), Ballard’s (1993, 1994, 1997 and 2000) came out later with the last planner system which showed an efficient way in understanding the construction process specially managing the flow aspect of the construction process. The last planner was considered a synonym to lean construction although it was never true.
This concept of flow was taken to a new level after the introducing methodologies proposed by Womack and further by Lean enterprise institute (LEI) (Womack and Jones 1996). With help from the LEI, a better understanding of the lean thinking system was established.
After which Ballard et al (2002) then gave a useful understanding of the room for improvement within the ordered part of the construction process mainly the industry part, but also in the use of buffers and in the interplay between the ordered world of components manufacturing and the complex world of the construction process.
Around that time, the TFV theory which was proposed by Koskela (2002) faced criticism and voices were raised that the construction process is even more complex and that it should be understood in an entirely new perspective.
After which Koskela and Howell (2002) suggested construction management as one of the several understanding and that it is understood as a scientific experiment. By this it accepted the unpredictable nature of the construction project. But the acceptance of the industry as a dynamic and complex had a much deeper implication for the future development of lean construction as it challenges the production theory, which is inspired by the ordered and foreseeable world only. This could be improved only by the use of buffers, well defined process and procedures. According to Howell (2003 and 2004), the chaotic system should be managed based on cooperation conversation and learning. 122
Comparative Study of Lean Principles in the Construction & Aerospace Industry
The concept of creating value has been dealt and focussed by value engineering to ensure that the value specified will be delivered to the client while the cost is as low as possible, a principal which in its nature deals with minimising the waste.
By looking back on the years to make the lean construction a successful process, it is seen that maximum focus was given on the reduction of waste, then a little on the project management principle and the least on the focus of adding value to the customer. (Berteslen, 2004)
5.4 Nature of Aerospace industry The aerospace mantra has always been ‘Higher, Faster, Farther’. (Murman et al., 2004) This industry has been driven by and has thrived on the technical challenges of air and space flight. The national and international prestige of the industry is the need for military superiority which has driven huge investments into the aerospace industry making it a profitable industry. In most countries, the aerospace industry is a cooperation of public and private industries. Some countries have space programs like NASA, ESA which are under the command of the government. The aerospace industry is similar to the manufacturing industry where the ultimate aim is to deliver a final product with value to the customer. The core challenge of the industry in the modern era is the identification and delivery of value to all its stake holders and clients. How is the challenge going to be accomplished? Meeting such challenges requires the prime focus of highly efficient management practices. It requires lean capability at the enterprise level for meeting such challenges. The enterprise level is necessary as it is possible to apply lean to the entire ‘value stream’ as well as inter connected levels of activity that reach across national and international boundaries. (Murman et al., 2004)
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Comparative Study of Lean Principles in the Construction & Aerospace Industry 5.5 Key Drivers of lean in Aerospace The question can be asked, what are the contextual factors that have caused the implementation of lean in lean production into the aerospace industry? There are three relevant factors which has cause the introduction of lean thinking with in the aerospace industry: According to Crute et al., (2003), the key drivers of lean are:
First, after the end of the cold war, it prompted a drastic reduction in defence procurement budgets resulting in the reduction of military markets. The demand and supply of the military market was instable causing huge supply and little demand. The defence industry could no longer justify the mentality of the cost plus contracts that characterised the cold war era. There was also difficulty in seeking new markets after the cold war due to political tension.
Second, following the gulf war, the passenger demand cut down drastically causing airlines to cancel or postpone civil aircraft orders. After this period of low demand, the demand for civil aircraft soared at a sweeping rate. The inability of the industry to respond to such market dynamism was reflected in long lead times.
Third, in common with other industries, globalisation has become a central feature. The rise of globalisation has clearly necessitated a complete rethink for some firms in terms of how they can organise and reconfigure themselves. Globalisation has led to the formation of a number of global players. After the $13.3 billion merger of Boeing and McDonnell Douglas in the year 1997, Philip Condit the CEO of the combined group made a statement.
‘We are moving, I think, inexorably towards a global economy’ (Source: Finance times, 1997, Sept 19th)
These events in time signalled a radical change for the global aerospace industry. There was an over capacity in the market and the profits were declining (Cosentino, 1999). The industry had to make a change soon by pursuing innovative management practices such as the lean thinking system itself. In fact Boeing itself is pursuing these 124
Comparative Study of Lean Principles in the Construction & Aerospace Industry practices to cut down cost structure, move up the value chain, improvement of manufacturing facility by 90%.
5.6 Transferring lean into aerospace – The challenges The applicability of lean in other industries has always being questioned. (James Moore and Gibbon, 1997), yes the lean concept has its root in the automotive industry and the high contrast between the high volume setting and low volume environment of the aerospace industry is enormous. Though both the industries are of manufacturing environments, there are sector differences between both the industries. According to Hill, the difference between the two manufacturing environment run beyond production and transformation characteristics and it is with the competitive priorities. To use Hill (1995) terminology, there are major differences between order qualifying and order winning which mark the differentiation of the high and low volume. The transfer of practices across sectors can cause problems but this is not peculiar to lean practices alone but to other practices too. Indeed (Womack and Jones, 1996) provided a detailed explanation of the introduction of lean practices into Pratt & Whitney, one of the leading aero engine manufacturers. The aerospace sector is actually at an advantage over the automotive sector in terms of applying lean principle. The lower volumes in aerospace shows that they are closer to the lean ideal of single piece flow.
The next concern is that aerospace is ten years behind the automotive sector in regard to the implementation of lean practices and although this may provide opportunities for learning, but it is an important issue. According to Kochan et al (1999) the lean system seems to be diffusing through out the world with many firms sticking to the traditional methods of management. But the aerospace has 80% of its cost in the design stage. Therefore the ten year gap may not be much of a disadvantage as it appears. But the biggest difficulty faced by any industry to implement lean will be to overcome the traditional ways of thinking and practices. (Crute et al., 2003)
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Comparative Study of Lean Principles in the Construction & Aerospace Industry 5.7 Why Aerospace and Construction? – The differences
5.7.1 Introduction
The managerial practices differ across the aerospace and the construction industry and are shaped by contextual differences. The different pressure and market dynamism faced by both the industries have shaped the different development paths. (Green et al., 2004) This chapter aims at comparing the principle of lean thinking which is value to perfection in the aerospace and construction sectors. It is very important to understand the historical developments that have shaped the path of different sectors for it is central to understand the dynamics of change. Such an understanding is mandatory if the practitioners need to apply innovative managerial concepts to adapt future changes.
According Green et al. (2004), the key difference are:
5.7.2 Structural Difference (date limited to UK industries)
Annual turnover: The construction industry is significantly larger than aerospace in terms of annual turnover. The annual turnover for the construction industry is 83.59 billion pounds Source: (DTI, 2003a) and the turnover for the aerospace sector is 16.14 billion pounds Source: (SBAC, 2003).
Employee numbers: The number of employees in both the sectors also differs in accordance with the ways in which the sector boundaries are defined. The provisional adjustment employment figure for the construction industry is 1,599,000 Source: (DTI, 2003a) and that of aerospace is 117,256 Source: (SBAC, 2003).
Structure: Both the sectors differ in terms of structure in the market. The construction sector, although it is larger than the aerospace, it is said to be more fragmented with greater concentration of smaller firms. It comprises of 122,220 Small and medium enterprises (SME). In conjunction with sole proprietor, it accounts for 82.6% of the work force Source: (DTI, 2003b). The aerospace sector though small when compared to the construction sector is much more consolidated in the market. It comprises of 126
Comparative Study of Lean Principles in the Construction & Aerospace Industry only 380 SME in the aerospace sector. These 380 SME employ only 9.6% of the work force and the remaining is employed by the large firms Source: (DTI, 2003b).
Suppliers: The suppliers in the aerospace is said to be more specialised than that of the construction, with a higher technological expertise. The technological expertise is spread throughout the supply chain of the aerospace than the construction sector. In the construction sector, suppliers tend to compete on cost efficiency rather than technical expertise.
Entry Barriers: The high technology and significant inter dependency with complex network presents a barrier to potential new entrants in the aerospace. Where as the construction have had very low barriers into entry
Client Base: The client base of the construction industry is big; every commercial property owner is associated with the construction industry in some way or the other. But in the aerospace industry which is consolidated, the client base is very small and is limited to certain sophisticated clients who maintain long term relations with the aerospace sector.
5.7.3 Relations with Governments The aerospace industry as such has had a unique history with the aerospace and defence sector enjoying privileged relationship with government due to its strategic importance (Hayward, 1989). The government in the past has attempted to shelter the aerospace industry because of huge investments made by them to improve the defence sector during the time of war. In recent years the government policy toward aerospace sector has tended to give primacy to value for money rather than strategic supports. But the recent decline in the government bagging contracts highlight the importance of exporting contracts in sustaining a countries aerospace expertise. The new climate of globalised nature is brought about new practices with in the industry with lean being one of them. When compared to the aerospace, the construction sector is way below the government’s broader policy objective. It is extremely sensitive to government policy. Though for the past 25 years there has been a decline in the construction industry, the 127
Comparative Study of Lean Principles in the Construction & Aerospace Industry investments into the sector has been driven by public funds. In the construction industry, the interest rates play an influential role either directly or indirectly. The interest rate controls the economy having consequences on the output of the industry.
Both the industries have had major intervention by the government depending on the market sentiments. The government has played a positive role in shaping the both the industries to what they are today. But the factor of competitive advantage lies beyond the hands of the government and should be obtained by the sectors itself. This is why new approaches like lean and six sigma have been adopted to make both these industries a better working environment.
The above, it shows the contrasting difference between both the industries which is why these two industries have been selected. 5.8 Comparison of Lean Thinking Principles across Construction and Aerospace The lean thinking system was born in the manufacturing industry with its principles being applied to different sectors at different levels. But applying these principles of lean is not very simple as the natures of industries differ with the manufacturing environment. For example take the design, production and sales of a manufacturing company are often managed inside one corporation and in the construction industry the value stream involves several companies. In aerospace, the eight- year lean initiative study at MIT has provided a living experiment for the creation of a value enterprise and formulation of lean principles with in the industry (Murman et al., 2002), and in the construction industry, the principles were taken from the lean thinking system and amended after years of research to suit the construction environment. Further down, the comparison of the lean principle in the construction and aerospace will be done. The purpose of this comparison is to see the widened scope of lean and how the principles of lean apply differently to the two different sectors. The principles of lean will be based on the manufacturing lean principles proposed by (Womack and Jones, 1996) which are value, value stream, flow, pull, perfection. This is done in order to show that the principles of lean are applicable to other industries and can bring about an influential change in a positive manner.
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Comparative Study of Lean Principles in the Construction & Aerospace Industry Figure 5.1: Comparison of Lean Principles…
Source: Lean Aerospace Initiative by Murman et al., (2002); Picchi, (2000)
5.8.1 Value The ultimate source of survival for any industry in the market is customers. Without which any market or industry will fail. It is very important that proper value is defined for these customers so that the customers know that their final product has Value for money. When looking at the manufacturing industry, the principle is about understanding the customer’s value. The value in this industry must be externally focussed on the final product. The customer and the producer have to work together to define the ultimate value of the product. (IFS, 2004) Even in the construction industry value is the first principle but here, it is very important to understand that the direct client and the final client are different for specifying and enhancing value. The construction industry is divided into two when it comes to the customer. It has the final client who is the ultimate user and the direct client who develops the construction project. In general, there is an institutional owner (shown in Figure - Institutional Market), that identifies needs for new buildings, plans
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Comparative Study of Lean Principles in the Construction & Aerospace Industry Figure 5.2: Institutional Market…
Source: Lean principle and construction main flows, Picchi, (2000)
and contracts its design and construction. Examples of institutional owners are: a Hotel Chain that needs a new hotel, a Government Ministry that needs a new school, a Company that needs a new office building, etc. In the development market (Figure – Development market) the user buys a building or a unit in a building. For example, a
Figure 5.3: Development Market…
Source: Lean principle and construction main flows, Picchi, (2000) 130
Comparative Study of Lean Principles in the Construction & Aerospace Industry
company that buys a new office or a family that buys an apartment. The user is the client of the developer; the developer is the client of the general contractor, and so on. Therefore when defining value in the construction industry, it is very important that the contractor, direct client and final client work together to define the final value for the construction project. (Picchi, 2000)
According to Murman et al. (2002), the principle of value in the aerospace industry is to create lean value by doing the job right and by doing the right job. How does the industry respond to this? Many firms in the aerospace industry reflect on a maturity dynamic which involves cost cutting and efficiency gains. Firms also try to explore ways of operating in a semi virtual business as ways to improve efficiencies. However replacing ‘faster is better’ with ‘cheaper is better’ doesn’t fully engage the deeper value issues associated with doing the right job. So to embrace the first principle in lean aerospace which is value creation, there should be an open flow of information around the strategic business decisions aimed at doing the right job, as well as information on continuous improvement efforts aimed at doing the job right, each of these enable the other to create and define value. Similarly, there should be a shared vision centred on both aspects and clear ways for all the employees to contribute with in the industry, (Murman. E et al 2002). The simple model for creating value in lean aerospace is divided into three phases. a. identify the required value b. construct a value proposition c. Deliver the value.
5.8.2 Value stream The value stream is the next principle in the lean thinking system. The value stream is combination of all the processes required to make a final product. It is in this stage that waste can be identified and eliminated. In the manufacturing industry, once the value of the customer is understood, an analysis of all the steps in the business processes is done to determine which process actually adds value. If an action does not add value, it should changed or removed from the process. (IFS, 2004)
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Comparative Study of Lean Principles in the Construction & Aerospace Industry The construction industry being highly fragmented and dependent on various partners has several participants who can influence over the projects. Some of them are: -
users
-
owners
-
developers
-
contractors
-
real estate developers
-
designers
-
equipment suppliers etc
Depending on the country and the market in a particular country, the participants to a particular construction project vary. For example, in Brazil several companies are a combination of a developer and general contractor. In the construction industry in any case it is very essential to identify all the partners for the proper identification of the value stream in the construction project. Also proper cooperation is required among the participants of the value stream which helps in the mapping of the value stream and in the identification and the elimination of waste, and this will help in improving the way construction are planned, contracted, designed, constructed, delivered and sold, etc. (Picchi, 2000)
Table 5.1: Construction and its Clients…
Source: Lean principle and construction main flows, Picchi, (2000) 132
Comparative Study of Lean Principles in the Construction & Aerospace Industry
In the aerospace industry, the lean principles are applied with the objective of transferring the enterprise into a lean organisation. The second principle focuses on delivering value only after identifying stakeholder’s value and constructing robust value proposition. For this principle, there is a precedence order to be followed. For the successful deliverance of value, it is very important to first have a structured value proposition, and similarly for a good structured value proposition, important to identify good value for the stakeholders as the value proposition cannot be structured around poorly identified value. Value proposition is a business or marketing strategy that summarises why a consumer should buy a product or use a service. This statement should convince a potential consumer that one particular product or service will add more value. As mentioned in the second principle, the value identification should be done once all the stakeholders of the project are identified. (Murman et al., 2002)
5.8.3 Flow Flow is defined as the process of producing a product from raw material to final completion with out any interruptions. The main aim of flow in the lean thinking system is to achieve a single piece flow. According to lean manufacturing, the principle aims at moving the product from one work centre to the other in a continuous system of flow rather than large batches. The production process should flow continuously from raw material to finished goods in dedicated production cells. (IFS, 2004) Where as in the construction industry, unlike in the manufacturing where the flow can be characterised inside one plant or corporation, each flow meaning is interpreted depending on the participant role in the value stream. The flow in the construction industry is divided into three. In the value stream ‘from order to cash’ has a strong interface with the cycle from ‘concept to launch’. This particular flow is called Business flow and it includes the design flow as a sub flow. The next flow is ‘from raw material to customer’ is the supply flow and the ‘job site flow’, which is both led by the general contractor. The business flow is mainly an information flow that deals with contracts, specifications, plans, controls, etc., with a specific relationship among participants. The job site flow is an information, products and services flow, in an 133
Comparative Study of Lean Principles in the Construction & Aerospace Industry environment quite different than manufacturing. The supply flow involves industrial and not-industrial products, and is similar to the supply chain in any other sector. Given below is a diagram depicting the flow movement in the construction industry. (Picchi, 2000)
Figure 5.4: Flows in Construction…
Source: Lean principle and construction main flows, Picchi, (2000)
In the aerospace industry, the third principle of lean is to fully realise lean value only by adopting an enterprise perspective. It is very important that when applying lean in any manufacturing or purchasing operation, the overall net gain of lean will be limited, which is why when applying in aerospace, it is very important to apply from an enterprise perspective and not just the manufacturing or supply chain operations. It 134
Comparative Study of Lean Principles in the Construction & Aerospace Industry is important that lean is integrated part of the overall enterprise strategy. Under this system, it is very important for the industry leaders to assert the interdependence of various stakeholders, and make clear that they are part of a common enterprise. The only problem here is make clear the meaning of enterprise such as the members involved, the partners etc so that lean can be adopted as a whole. (Murman et al., 2002)
5.8.4 Pull The idea of Lean is simply to bring the real world as close as possible to that ideal world, and the concept of Pull in lean thinking is a primary key in becoming “lean.” Pull - letting our customers “pull” product through your production system as they need it, rather than “pushing” product through your production pipeline. Rather than building goods to stock, customer demand pulls finished goods through the system in the lean manufacturing process. Work is not performed unless the part is required downstream. (IFS, 2004) According to Picchi (2000), in the construction industry, the contracting policy is an important issue that requires detailed analyzes. Some private and governmental owners have a permanent demand, but in general they demand constructions in an erratic rhythm, with great losses in the value chain. Housing, for example, has a permanent demand, but generally contracting shows peaks and valleys, due to discontinuity of Governmental housing Agencies policies, macroeconomic conditions, and other market sentimental issues. In theory, the Business Flow "pulls" the Job Site Flow that "pulls" the Supply Flow like shown in the above diagram In the past, the general contractor purchase policy generally pushes large batches into the job site, trying to avoid delays and lack of material but the lack of coordination in the three flows results in frequent work discontinuity. The "push culture" is also present in development. The Developer identifies market needs, plans and contracts the construction. After some months (or years) the product is "pushed" into the real estate market, which results sometimes in a long time to have the product sold. An effort of owners and all value chain participants towards demand stabilization is very important for the Lean transformation. A smooth pulling at the
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Comparative Study of Lean Principles in the Construction & Aerospace Industry end and a pull culture, in cascade, would avoid a lot o waste along the chain. (Picchi, 2000) The fourth principle in the aerospace industry is very different from that of the construction and manufacturing. It is to address the interdependencies across enterprise levels to increase lean value. When applying this principle of lean, the lean adopters
focus
on
identifying the interdependencies
in
the
organisation.
Interdependencies are of dynamic in nature and are mutually responsible to and sharing a common set of principle with others. From this context, it is the mutual understanding between the different partners or suppliers of the project. When the program enterprise as a whole gets the lean dynamic value going, it gives them a better foundation toward developing lean. Lean capability at the multi program level can, in turn, be more responsive in providing the enabling infrastructure at the program level. The same is true between the multi program level and the national level and the international enterprise.
When addressing the interdependencies,
institutions can either accelerate or undercut these lean enterprise value dynamics, depending on the degree to which they are aligned or misaligned. The infrastructure of an organisation is very important as it can be an essential enable, and can minimise dependencies on charismatic leaders. This principle focuses on increasing and enhancing value. (Murman et al., 2002)
5.8.5 Perfection Lean thinking becomes complete with the final approach of perfection. It is about continuous improvement in the systems of value stream, flow and pull. When explaining the concept of lean, it explains about eliminating waste and continuous improvement in the system which is achieving perfection. In the manufacturing industry, as elimination of waste from your processes is done, the flow of products is continuous according to the demands of the customers, this leads to a never ending reduction of time, cost, space, mistakes, and effort. One of the techniques applied to attain perfection is called Kaizen. (IFS, 2004) Seeking for perfection is a Lean principle understood as permanent incremental (kaizen) or radical (Kaikaku) improvements, eliminating waste and improving value for the client.
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Comparative Study of Lean Principles in the Construction & Aerospace Industry To achieve perfection, one of the most important elements is standardization of work (Ohno, 1988), (Monden, 1998). Work shall be highly specified as content, sequence, timing, and outcome (Spear and Bowen, 1999). Other important concepts are autonomation and Poka-yoke, assuring quality of every piece that is delivered to the next process. Manufacturing companies that are starting the Lean transformation have as a basis decades of process sheets, work instructions, work analysis, quality management,
and quality control techniques, etc.
However, in most construction companies, few methods are written, productivity data are rare and almost no formal process quality control used. These subjects must be developed, as a pre-requirement for the Lean transformation. Companies that developed quality systems have a minimum basis to start, with work instructions and quality control checklists. (Picchi, 2000) In the last years, the number of construction companies with ISO 9000 systems is increasing, in most countries, but they neither are nor a majority. Therefore, it is strongly recommended that the development of work instructions and quality control should be one of the first steps, in the action plan, towards the future state (Picchi, 2000). In the aerospace industry, the last principle in lean is that people, not just process, effectuate lean value. The entire implementation of lean is constrained, if people are not appreciated for the knowledge that uniquely resides in their roles and experience. For the elimination of waste in the aerospace industry, it is knowledge of the people which is required from all the three levels of the organisation. The same helps in the creation of value. Many organisation state the fact that people are their greatest resources, but when it comes to practice, there is no company willing to invest in their human resources which creates a downturn in the organisation. It is very important that people need to be given significant importance and credit for their work during the implementation of lean in the aerospace industry. Actually it is not only in the aerospace but in all the industries. (Murman et al. 2002)
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Comparative Study of Lean Principles in the Construction & Aerospace Industry 5.9 Summary This chapter focuses on the principles of lean; but in two very different industries. The construction and aerospace industries were selected mainly because of its huge differences. The main aim in this chapter is to prove that lean thinking is a universal concept which can be applied in any industry. From this chapter it is under stood that lean brings about positive results in any industry if implemented correctly.
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Moving On – Beyond Lean Thinking
CHAPTER 6
MOVING ON – BEYOND LEAN THINKING 6.1 The lean lifestyle The lean thinking initiative, much like a diet, is designed to trim fat and make you fitter, faster and more competitive, in short a high performer in the market. The overall goal of the concept is to improve the company profitability that underpins high performance. This performance is achieved by fighting flab of all sorts, from excess inventory to over extended set up times. But the benefits of applying the lean thinking principle can be very dramatic. Building flexibility into the various processes, facilities, and integrating and coordinating the overall supply chain network simplifies and speeds up product flow and facilitates just-in-time delivery. A slimmer supply chain optimizes the alignment of product capabilities with what customers actually want; which is the very concept of being lean in the organisation.
6.2 Winding up From the literature in the dissertation, the lean thinking model can be summarised into five principles: value, value stream, flow, pull and perfection. The main aim of these principles proposed by Womack and Jones (2000) are to create value by eliminating Muda. Lean is however not a process to be followed, but a way of thinking in the organisation, so anything or any operation which creates value to the final customer by eliminating waste in the process of the organisation is lean. But why lean thinking and not any other concept, this is because lean has derived itself to be successful and universal. Universal in the context that it can be applied in any industry, organisation, department and still create positive results. Lean is successful as it is one of the most innovative management concepts of the century which has brought about a revolution in many companies across the globe e.g. Toyota, Dell etc. But how is the implementation of lean thinking done? Lean implementation is possible by adopting and implementing a combination of the lean thinking principles 139
Moving On – Beyond Lean Thinking and the techniques of lean such as Kaizen, kanban etc. The lean elements and techniques do play an essential role in the successful implementation of the lean thinking principles. The nature of the organisations or companies differs from industry to industry and so does the implementation of lean thinking. Depending on the industry in which lean thinking is applied, the lean elements and techniques are chosen to suit the industry. Under taking lean thinking is a way of life and it requires 100 percent commitment and involvement of everyone in the company from top management to the shop floor, in changing the companies’ culture along lean lines.
Although companies are successfully implementing lean thinking principles into their organisations, they still find it difficult to convince employees to give up the traditional system of work. To overcome such issues, Lean management integrates the principles of lean thinking with the science of ergonomics trying to design the
job,
equipment and work place to fit the worker. This helps employees of organisations realise the actual worth of lean thinking and how it benefits them and the organisation. This is an era where acceleration is just about everything (Gleick, 1999). The terminology ‘industry clockspeed’ coined by (Fine 1998, 2000) has a powerful impact on the way organisations are structured and managed in the twenty first century. The supply chain is very important as it connect the upstream suppliers and the down stream customers. All the activities, right from raw material up to the final product pass through the supply chain. Therefore, it is very important that there is smooth flow of material and information across the supply chain. The shorter the supply chain and the lifecycle of the product, the more competitive advantage the company are in the market over its competitors. Since the supply chain plays an integral role in the success of companies. It is very essential that innovative management concepts are applied to the supply chain to make it more effective. The principle of value, value stream, flow, pull and perfection when applied bring about efficient results to the supply chain. Lean thinking helps the supply chain in creating value to the customer, and then it identifies the value stream where all the Muda are eliminated which helps in creating only value adding activities. When there is no Muda in the supply chain, it allows the smooth flow of information and material especially when the customer pulls the product. The fifth principle is perfection, since perfection cannot be
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Moving On – Beyond Lean Thinking measured; it involves the continuous improvement and innovation of supply chain system and process. Even from the study conducted by (Vitasek. K et al, 2002), it clearly shows how different are the perception of the lean adopters and the non adopters. It also proves that the lean adopters enjoy reduced Stock Keeping Units (SKU) counts and inventory levels and report higher returns in terms of revenue and profitability when compared to the non adopters. Notably, all of these factors contribute to the bottom line of an efficient supply chain. From this it can be said that the supply chain is efficient with the implementation of the lean principles. To illustrate that the concept of lean thinking is universal, the dissertation compared the principles of lean in two massive but very different industries; the construction and aerospace industry. The concept of lean construction has been derived from the principles of manufacturing. It uses the same principle of value, value stream, flow, pull and perfection but is applied in a manner which suits the construction environment. Aerospace on the other hand came out with lean principle which is entirely different but following the same underlying concept of lean thinking. Unlike manufacturing and construction that focuses on implementing lean at an operation level, the aerospace focus on implementing lean at an enterprise level by getting all the partners of the business involved. But if we look deep into the principles of both the industries, there is an overlap of concepts. For the aerospace, it is lean at an enterprise level, but to achieve this it is important to implement value, value stream, flow, pull and perfection which are the same as lean manufacturing and lean construction. And for lean construction, though lean is applied only at an operational level, the ultimate aim is to make the entire construction enterprise lean. Both the industries have successfully implemented lean and this has permitted them to produce efficient results even in times bad market sentiments. Though both the industries do have their own methodology of implementing lean, their greatest challenge faced is revolutionising the traditional system.
Now most industries have benefited a lot from the concept of lean thinking; they have produced better results in terms of sales, revenue, profitability and products. Lean 141
Moving On – Beyond Lean Thinking thinking is more than just a managerial process; it is being implemented as competitive weapon in order to have a competitive edge in the market. It has been noticed that companies who apply lean thinking is a step ahead of others in terms of continuous growth and innovation. Therefore lean thinking has proved to be successful and universal.
6.3 Beyond Lean Thinking The concept of lean thinking has come a long way; it all started back in Japan and now is one of the most required concepts by all companies and industries in the West. The concept of lean has travelled all across the globe having different names and terminologies but applying the same principle of creating value by eliminating Muda. Today's competitive environment leaves no room for error. Companies must delight customers and relentlessly look for new ways to exceed their expectations which is why lean thinking has gone beyond the current principles and practices. Companies are merging the concept of lean along with other managerial concepts such as six sigma. Lean six sigma is the latest of the managerial practices where it helps in creating value by eliminating Muda from the process which is the function of lean and then removing the causes of defects and errors from the process which is the function of six sigma. The companies take the advantages of both to have a competitive edge in the market. At the end of it both the concept’s ultimate aim is to create value and increase profitability to the company. This is just one example of how the concept of lean has innovated. Lean has been applied jointly with many other concepts to bring about positive results to companies. What is the future of lean thinking is a question which can be answered only through time. The factor of time has been a major threat to most businesses; they have found it difficult to either cope up or overcome the challenges. But for now as long as the lean thinking principles are applied into the company; it can produce far more promising results than ever. Therefore lean thinking is the ultimate competitive tool in the market.
Lean Thinking – Not a process; but a way of life…
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Appendix
Appendix
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